FR Doc 2010-26893[Federal Register: October 27, 2010 (Volume 75, Number 207)]
[Proposed Rules]
[Page 66018-66037]
From the Federal Register Online via GPO Access [wais.access.gpo.gov]
[DOCID:fr27oc10-17]
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COMMODITY FUTURES TRADING COMMISSION
17 CFR Part 162
RIN Number 3038-AD12
Business Affiliate Marketing and Disposal of Consumer Information
Rules
AGENCY: Commodity Futures Trading Commission.
ACTION: Notice of proposed rulemaking.
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SUMMARY: The Commodity Futures Trading Commission (``Commission'' or
``CFTC'') is proposing regulations to implement new statutory
provisions enacted by Title X of the ``Dodd-Frank Wall Street Reform
and Consumer Protection Act'' (``Dodd-Frank Act''). These proposed
regulations apply to futures commission merchants, retail foreign
exchange dealers, commodity trading advisors, commodity pool operators,
introducing brokers, swap dealers and major swap participants
(collectively, ``CFTC registrants''). The Dodd-Frank Act provides the
CFTC with authority to implement regulations under sections 624 and 628
of the Fair Credit Reporting Act (``FCRA''). The proposed regulations
implementing section 624 of the FCRA require CFTC registrants to
provide consumers with the opportunity to prohibit affiliates from
using certain information to make marketing solicitations to consumers.
The proposed regulations implementing section 628 of the FCRA require
CFTC registrants that possess or maintain consumer report information
in connection with their business activities
[[Page 66019]]
to develop and implement a written program for the proper disposal of
such information.
DATES: Comments must be received on or before December 27, 2010.
ADDRESSES: You may submit comments, identified by RIN number 3038-AD12,
by any of the following methods:
Federal eRulemaking Portal: http://www.regulations.gov.
Follow the instructions for submitting comments.
Regular Mail: David Stawick, Secretary, Commodity Futures
Trading Commission, Three Lafayette Centre, 1155 21st Street, NW.,
Washington, DC 20581.
E-mail: [email protected].
Hand Delivery/Courier: Same as mail above.
All comments must be submitted in English, or if not, accompanied
by an English translation. Comments will be posted as received at
http://www.cftc.gov. You should submit information only that you wish
to make available publicly. If you wish the Commission to consider
information that is exempt from disclosure under the Freedom of
Information Act, a petition for confidential treatment of the exempt
information may be submitted according to the established rules in CFTC
Regulation 145.9.\1\
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\1\ 17 CFR 145.9.
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The Commission reserves the right, but shall have no obligation, to
review, pre-screen, filter, redact, refuse or remove any or all of your
submission from http://www.cftc.gov that it may deem to be
inappropriate for publication, such as obscene language. All
submissions that have been redacted or removed that contain comments on
the merits of the rulemaking will be retained in the public comment
file and will be considered as required under the Administrative
Procedure Act, 5 U.S.C. 551 et seq., and other applicable laws, and may
be accessible under the Freedom of Information Act, 5 U.S.C. 552.
FOR FURTHER INFORMATION CONTACT: Carl E. Kennedy, Counsel, (202) 418-
6625, Commodity Futures Trading Commission, Office of the General
Counsel, Three Lafayette Centre, 1155 21st Street, NW., Washington, DC
20581, facsimile number (202) 418-5524, e-mail: [email protected].
SUPPLEMENTARY INFORMATION:
I. Background
On July 21, 2010, President Obama signed the Dodd-Frank Wall Street
Reform and Consumer Protection Act (``Dodd-Frank Act'').\2\ Title VII
of the Dodd-Frank Act \3\ amended the Commodity Exchange Act (``CEA'')
\4\ to establish a comprehensive new regulatory framework for swaps and
security-based swaps. The legislation was enacted to reduce risk,
increase transparency, and promote market integrity within the
financial system by, among other things: (1) Providing for the
registration and comprehensive regulation of swap dealers and major
swap participants; (2) imposing clearing and trade execution
requirements on standardized derivative products; (3) creating robust
recordkeeping and real-time reporting regimes; and (4) enhancing the
Commodity Futures Trading Commission's (``Commission'' or ``CFTC'')
rulemaking and enforcement authorities with respect to, among others,
all registered entities and intermediaries subject to the Commission's
oversight.
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\2\ See Dodd-Frank Wall Street Reform and Consumer Protection
Act, Pub. L. 111-203, 124 Stat. 1376 (2010). The text of the Dodd-
Frank Act may be accessed at http://www.cftc.gov./LawRegulation/
OTCDERIVATIVES/index.htm.
\3\ Pursuant to Section 701 of the Dodd-Frank Act, Title VII may
be cited as the ``Wall Street Transparency and Accountability Act of
2010.''
\4\ 7 U.S.C. 1 et seq.
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In addition, Title X of the Dodd-Frank Act--which is entitled the
Consumer Financial Protection Act of 2010 (``CFP Act'')--established a
Bureau of Consumer Financial Protection within the Federal Reserve
System and provided this new Federal agency with rulemaking,
enforcement, and supervisory powers over many consumer financial
products and services and the entities that sell them. In addition, the
CFP Act amends a number of other Federal consumer protection laws
enacted prior to the Dodd-Frank Act, including the Fair Credit
Reporting Act (``FCRA''),\5\ the Fair and Accurate Credit Transactions
Act of 2003 (``FACT Act'') \6\ and Title V of the Gramm-Leach-Bliley
Act \7\ (``GLB Act'').
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\5\ See 15 U.S.C. 1681-1681x. The FCRA, enacted in 1970, sets
standards for the collection, communication, and use of information
bearing on a consumer's credit worthiness, credit standing, credit
capacity, character, general reputation, personal characteristics,
or mode of living that is collected and communicated by consumer
reporting agencies. 15 U.S.C. 1681-1681x.
\6\ See Public Law 108-159, Section 214, 117 Stat. 1952, 1980
(2003). The FACT Act was signed into law on December 4, 2003. The
FACT Act amended the FCRA to enhance the ability of consumers to
combat identity theft, to increase the accuracy of consumer reports,
to allow consumers to exercise greater control regarding the type
and amount of solicitations they receive, and to restrict the use
and disclosure of sensitive medical information. A portion of
section 214 of the FACT Act amended the FCRA to add section 624 to
the FCRA.
\7\ See Public Law 106-102, 113 Stat. 1338 (1999).
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Section 1088 of the CFP Act sets out two amendments to the FCRA and
the FACT Act directing the Commission to promulgate regulations that
are intended to provide privacy protections to certain consumer
information held by any person that is subject to the enforcement
jurisdiction of the Commission. One provision of section 1088 amends
section 214(b) of the FACT Act--which added section 624 to the FCRA in
2003--and directs the Commission to implement the provisions of section
624 of the FCRA with respect to persons that are subject to the CFTC's
enforcement jurisdiction. Section 624 of the FCRA gives consumers the
right to prohibit a CFTC registrant \8\ from using certain information
obtained from an affiliate to make solicitations to that consumer
(hereinafter referred to as the ``affiliate marketing rules''). The
other provision in the CFP Act amends section 628 of the FCRA and
mandates that the Commission implement regulations requiring persons
subject to the CFTC's jurisdiction who possess or maintain consumer
report information in connection with their business activities to
properly dispose of that information (hereinafter referred to as the
``disposal rules'').
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\8\ ``CFTC registrant'' includes a futures commission merchant,
retail foreign exchange dealer, commodity trading advisor, commodity
pool operator, introducing broker, swap dealer or major swap
participant.
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Both sections 624 and 628 of the FCRA required various Federal
agencies charged with regulating financial institutions in possession
of consumer information to issue regulations in final form in
consultation and coordination with each other. In particular, these
sections required the Office of the Comptroller of the Currency
(``OCC''), the Board of Governors of the Federal Reserve System
(``Board''), the Federal Deposit Insurance Corporation (``FDIC''), the
Office of Thrift Supervision (``OTS''), the National Credit Union
Administration (``NCUA'') (collectively, the ``Banking Agencies''), the
Securities and Exchange Commission (``SEC'') and the Federal Trade
Commission (``FTC'') (the SEC, FTC and the Banking Agencies, are
collectively, the ``Agencies'') in consultation and coordination with
one another, to issue rules implementing these sections of the FCRA.
The Agencies already have adopted final affiliate marketing rules and
disposal rules.\9\ Accordingly, the
[[Page 66020]]
Commission is now proposing to adopt similar rules to the final rules
adopted by the Agencies, to the extent possible, to ensure consistency
and comparability.
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\9\ For the disposal rules adopted by the various Federal
agencies, see 69 FR 68690 (Nov. 24, 2004) (FTC); 69 FR 77610 (Dec.
28, 2004) (Banking Agencies); 73 FR 13692 (Mar. 13, 2008) (SEC). For
the affiliate marketing rules adopted by the various Federal
agencies, see 72 FR 61424 (Oct. 31, 2007) (FTC); 72 FR 62910 (Nov.
7, 2007) (Banking Agencies); 74 FR 58204 (Sept. 10, 2009) (SEC).
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The Commission requests comment on all aspects of the proposed
regulations--both the affiliate marketing rules and the disposal
rules--that are highlighted in the discussion in Section II below.
II. Explanation of the Proposed Regulations
A. Affiliate Marketing Rules
Section 624 of the FCRA and the Commission's proposed regulations
generally provide that consumers can block a CFTC registrant from
soliciting the consumer based on ``eligibility information'' (i.e.,
certain financial information, such as information regarding the
consumer's transactions or experiences with the person) that such
registrant received from an affiliate that has or previously had pre-
existing business relationship. Under the proposed regulations, these
registrants can make solicitations to a consumer based on that
consumer's eligibility information if:
(1) The consumer is given clear, conspicuous and concise notice;
(2) The consumer is given a reasonable opportunity to opt out of
such use of the information; and
(3) The consumer does not opt out.
Section 624 governs the use of information by an affiliate, not the
sharing of information with or among affiliates.\10\ While some of the
entities that fall under the Commission's jurisdiction may comply
already with the regulations promulgated by other Federal agencies
implementing the provisions of section 624 of the FCRA, the Commission
seeks comment on its proposed regulations implementing section 624 of
the FCRA.
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\10\ The opt-out right contained in section 624 of the FCRA is
distinct from the affiliate sharing provisions under section
603(d)(2)(A)(iii) of the FCRA.
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Responsibility for Providing Notice and an Opportunity to Opt Out
Section 624 does not specify which affiliate must give the consumer
notice and an opportunity to opt out of the use of the information by
an affiliate for marketing purposes. The Commission has reviewed the
proposed and final regulations issued by the Agencies implementing
section 624 and has determined to take a consistent approach with
respect to which affiliate may provide the initial opt-out notice. As
such, the Commission's proposed regulations provide that the initial
opt-out notice must be provided either by an affiliate that has or
previously had a ``pre-existing business relationship'' with the
consumer, or as part of a joint notice from two or more members of an
affiliated group, provided that at least one of the affiliates on the
joint notice has or previously had a pre-existing business relationship
with the consumer. The Commission agrees with the Agencies that this
approach provides a measure of flexibility and ensures that the notice
is provided by an entity that is known to the consumer. The Commission
invites comment on whether this approach continues to be a reasonable
one.
Scope of Coverage
Section 624 of the FCRA specifies under which circumstances the
provisions under this section and the proposed regulation do not apply.
Specifically, section 624(a)(4) provides that the requirements and
prohibitions of that section do not apply, in part, when: (1) The
covered affiliate receiving the information has a pre-existing business
relationship with the consumer; (2) the information is used to perform
services for another affiliate that does not have such a relationship
with the consumer (subject to certain conditions described below); (3)
the information is used in response to a communication initiated by the
consumer; or (4) the information is used to make a solicitation that
has been authorized or requested by the consumer. The Commission has
incorporated each of these statutory exceptions into the proposed rule.
In addition, the Commission has set out the persons to whom the
proposed rule will apply, as well as the type of consumer information
that is the subject of such rule. The Commission solicits comments on
whether there should be other circumstances to which the proposed
regulations do not apply.
Duration of Opt Out
Section 624(a)(3) of the FCRA provides that a consumer's affiliate
marketing opt-out election shall be effective for at least five years.
Accordingly, the proposed regulations provide that a consumer's opt-out
election would be valid for a period of at least five years (the ``opt-
out period''), beginning as soon as reasonably practicable after the
consumer's opt-out election is received, unless the consumer revokes
the election before the opt-out period has expired. When a consumer
opts out, unless a statutory exception applies, a receiving affiliate
would be unable to make or send marketing solicitations to that
consumer based on his or her eligibility information during the opt-out
period.
As described in the section-by-section analysis below, an extension
notice would be provided to the consumer at the end of the opt-out
period if the receiving affiliate wishes to make marketing
solicitations. Affiliated persons may wish to avoid the cost and burden
of tracking five-year consumer opt-out periods with varying start and
end dates, and delivering extension notices to each consumer at the
appropriate time, by choosing to treat a consumer's opt-out election as
effective for a period longer than five years, including indefinitely.
An affiliate without a pre-existing business relationship that chooses
to honor a consumer's opt-out election for more than five years would
not violate the proposed rules.
In the discussion that follows, the Commission solicits comment on
specific aspects of the proposed regulations on a section-by-section
basis.
Section 162.1--Purpose, Scope and Examples
Proposed section 162.1 sets forth the purpose and scope of the
proposed regulations. This section also provides that examples in this
part are not exclusive; compliance with an example, to the extent
applicable, constitutes compliance with this subpart.
Section 162.2--Definitions
Proposed section 162.2 contains definitions for, inter alia, the
following terms: ``affiliate''; ``clear and conspicuous''; ``common
ownership or common corporate control''; ``communication'';
``company''; ``consumer''; ``covered affiliate''; ``eligibility
information''; ``financial product or service''; ``major swap
participant''; ``person''; ``pre-existing business relationship'';
``solicitation''; and ``swap dealer''.
Affiliate
Section 2 of the FACT Act (which, as noted above, added section 624
to the FCRA) defines the term ``affiliate'' to mean ``persons that are
related by common ownership or affiliated by corporate control.''
The FACT Act and the GLB Act contain a variety of approaches to
define the term ``affiliate.'' Proposed paragraph (a) employs the same
formulation used by the Commission in defining ``affiliate'' under part
160 of the
[[Page 66021]]
Commission's Regulations.\11\ Under the proposed regulation, the
definition of ``affiliate'' will mean any company that is under common
ownership or common corporate control with a covered affiliate.\12\ The
Commission believes it is important to harmonize the treatment of
``affiliate'' across its Regulations as much as possible and to
construe them to have the same meaning. The Commission solicits
comments on whether there should be any meaningful difference between
the Commission's proposed definitions and the FACT Act and the GLB Act
definitions.
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\11\ Part 160 of the Commission's Regulations implement the
provisions of Title V of the GLB Act. Under Title V of the GLB Act,
``financial institutions'' (which include futures commission
merchants, retail foreign exchange dealers, commodity trading
advisors and other CFTC registrants) are required to provide initial
and annual privacy notices to their customers. These requirements
apply only to customers that are individuals who obtain financial
products or services that are primarily used for personal, family,
or household purposes. Part 160 also requires financial institutions
that share nonpublic, personal information about a customer with
non-affiliates to provide the customer with a reasonable opportunity
to opt out of the sharing of such information. See section 160.7 of
the Commission's Regulations.
\12\ The terms ``swap dealer'' and ``major swap participant'' as
used in this proposed regulation refer to the statutory definitions
of such terms as defined in Title VII of the Dodd-Frank Act, and as
may be further defined by the Commission in a future rulemaking. See
section 721(b) of the Dodd-Frank Act, which provides that the
Commission has the authority to adopt rules further defining any
term included in the Dodd-Frank Act, which amends the CEA. See also
section 721(c) which provides that the Commission is required to
adopt a rule to further define, inter alia, the terms ``swap
dealer'' and ``major swap participant'' to include transactions and
entities that have been structured to evade provisions in the Dodd-
Frank Act.
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Clear and Conspicuous
Proposed paragraph (b) defines the term ``clear and conspicuous''
to mean reasonably understandable and designed to call attention to the
nature and significance of the information presented in the notice.
Companies retain flexibility in determining how best to meet the clear
and conspicuous standard. Again, the Commission has decided to
harmonize the definition of this term across its Regulations. In
addition, the Commission believes that the FCRA directs the Commission
to provide specific guidance regarding how to comply with the clear and
conspicuous standard. See 15 U.S.C. 1682s-3(a)(2)(B).
Companies may wish to consider a number of methods to make their
notices clear and conspicuous. A notice or disclosure may be made
reasonably understandable through methods that include, but are not
limited to: Using clear and concise sentences, paragraphs, and
sections; using short explanatory sentences; using bullet lists; using
definite, concrete, everyday words; using active voice; avoiding
multiple negatives; avoiding legal and highly technical business
terminology; and avoiding explanations that are imprecise and are
readily subject to different interpretations. Various methods may also
be used to design a notice or disclosure to call attention to the
nature and significance of the information in it, including, but not
limited to, using: A plain-language heading; a typeface and type size
that are easy to read; wide margins and ample line spacing; or boldface
or italics for key words. Companies that provide the notice on an
Internet web page may use text or visual cues to encourage scrolling
down the page if necessary to view the entire notice, and take steps to
ensure that other elements on the Web site (such as pop-up ads, text,
graphics, hyperlinks, or sound) do not distract attention from the
notice.
When a notice or disclosure is combined with other information,
methods for designing the notice or disclosure to call attention to the
nature and significance of the information in it may include using
distinctive type sizes, styles, fonts, paragraphs, headings, graphic
devices, and groupings or other devices. It is unnecessary, however, to
use distinctive features, such as distinctive type sizes, styles, or
fonts, to differentiate an affiliate marketing opt-out notice from
other components of a required disclosure (e.g., where a privacy notice
under the GLB Act includes several opt-out disclosures in a single
notice). Nothing in the clear and conspicuous standard requires the
segregation of an affiliate marketing opt-out notice when it is
combined with a privacy notice under the GLB Act or other provisions of
law.
It may not be feasible to incorporate all of the methods described
above all of the time. For example, a company may have to use legal
terminology, rather than everyday words, in certain circumstances to
provide a precise explanation. Companies are encouraged, but not
required, to consider the practices described above in designing their
notices or disclosures, as well as using readability testing to devise
notices that are understandable to consumers.
The Commission has proposed model forms in Appendix A that may, but
are not required to, be used to facilitate compliance with the
affiliate marketing notice requirements. The requirement for clear and
conspicuous notices would be satisfied by the appropriate use of one of
the model forms.
Common Ownership or Common Corporate Control
Proposed paragraph (f) defines the term ``common ownership or
common corporate control'' for purposes of Part 162 to mirror the
definition of ``control'' under Part 160. Under the proposal, ``common
ownership or common corporate control'' means the power to exercise a
controlling influence over the management or policies of a company
whether through ownership of securities, by contract, or otherwise. Any
person who owns beneficially, either directly or through one or more
controlled companies, more than 25 percent of the voting securities of
any company is presumed to control the company. Any person who does not
own more than 25 percent of the voting securities of a company will be
presumed not to control the company.
Company
Proposed paragraph (g) defines the term ``company'' to mean any
corporation, limited liability company, business trust, general or
limited partnership, association, or similar organization. This
definition is consistent with the definition of company in Part 160 of
the Commission's Regulations.
Concise
Proposed paragraph (h) defines the term ``concise'' to mean a
reasonably brief expression or statement. The proposal also provides
that a notice required by this subpart may be concise even if it is
combined with other disclosures required or authorized by Federal or
state law. Such disclosures may include, but are not limited to, a GLB
Act privacy notice or other consumer disclosures required under the
FCRA or any other provision of law.
As noted above, the Commission has proposed model forms in Appendix
A that may, but are not required to, be used to facilitate compliance
with the affiliate marketing notice requirements in this subpart. The
requirement for concise notices would be satisfied by the appropriate
use of one of the model forms.
Consumer
Proposed paragraph (i) defines the term ``consumer'' to mean an
individual person, which follows the statutory definition in section
603(c) of the FCRA. For purposes of this definition, an individual
acting through a legal representative qualifies as a consumer. The
Commission notes that the
[[Page 66022]]
definition of ``consumer'' is broader than the definition of that term
in the GLB Act and is consistent with the definitions used by the
Agencies in their rulemakings promulgated under section 624 of the
FCRA. The Commission believes that the use of distinct definitions of
``consumer'' in the two statutes reflects differences in the scope and
objectives of each statute.
Covered Affiliate
Proposed paragraph (h) defines the term ``covered affiliate'' to
mean a futures commission merchant, retail foreign exchange dealer,
commodity trading advisor, commodity pool operator, introducing broker,
swap dealer or major swap participant, which is subject to the
jurisdiction of the Commission.
Eligibility information
Under proposed paragraph (j), the term ``eligibility information''
means any information that would be a consumer report if the exclusions
from the definition of ``consumer report'' in section 603(d)(2)(A) of
the FCRA did not apply.\13\ Examples of the type of information that
would fall within the definition of ``eligibility information''
includes an affiliate's own transaction or experience information, such
as information about a consumer's account history with that person, and
other information, such as information from credit bureau reports or
applications. The Commission's proposal defines the term ``eligibility
information'' consistently with the definitions in the Agencies'
regulations promulgated pursuant to section 624 of the FCRA.
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\13\ Section 603(d)(2)(A) of the FCRA provides that the term
``consumer report'' does not include ``(i) [any] report containing
information solely as to transactions or experiences between the
consumer and the person making the report; (ii) communication of
that information among persons related by common ownership or
affiliated by corporate control; or (iii) communication of other
information among persons related by common ownership or affiliated
by corporate control, if it is clearly and conspicuously disclosed
to the consumer that the information may be communicated among such
persons and the consumer is given the opportunity, before the time
that the information is initially communicated, to direct that such
information not be communicated among such persons * * *.'' Thus,
the scope of what falls within the definition of ``eligibility
information'' is broader than, and includes, information that would
fall within the definition of ``consumer report''.
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The term ``eligibility information'' does not include aggregate or
blind data that does not contain personal identifiers. Examples of
personal identifiers include account numbers, names, or addresses, as
well as Social Security numbers, driver's license numbers, telephone
numbers, or other types of information that, depending on the
circumstances or when used in combination, could identify the consumer.
The Commission invites comment on whether the term ``eligibility
information'', as defined, appropriately reflects the scope of what
information should be covered by this proposed regulation.
Financial Product or Service
Proposed paragraph (l) defines the term ``financial product or
service'' to mean any product or service that a futures commission
merchant, retail foreign exchange dealer, commodity trading advisor,
commodity pool operator, introducing broker, major swap participant or
swap dealer could offer that is subject to the Commission's
jurisdiction. This definition is consistent with the definition of
financial product or service in Part 160 of the Commission's
Regulations, with certain revisions made to fit within the scope of the
proposed regulations. The Commission invites comment on whether the
term ``financial product or service'', as defined, appropriately
captures the types of products or services that should be covered by
this regulation.
Major Swap Participant
Proposed paragraph (n) defines the term ``major swap participant''
to have the same meaning as in section 1a(33) of the Commodity Exchange
Act, as may be further defined by the Commission's Regulations, and
includes any person registered as such thereunder.
Person
Proposed paragraph (o) defines the term ``person'' to mean any
individual, partnership, corporation, trust, association, or other
entity. For purposes of this part, actions taken by an agent on behalf
of a person that are within the scope of the agency relationship will
be treated as actions of that person. The definition of person in the
proposed regulation is consistent with the definition of person in CFTC
Regulation 1.3(u).
Pre-Existing Business Relationship
Proposed paragraph (p) defines this term to mean a relationship
between a person (or a person's licensed agent) and a consumer based on
the following: (1) A financial contract between the person and the
consumer that is in force on the date on which the consumer is sent a
solicitation by this subpart; (2) the purchase, rental, or lease by the
consumer of a person's financial products or services, or a financial
transaction (including holding an active account or a policy in force
or having another continuing relationship) between the consumer and the
person, during the 18-month period immediately preceding the date on
which a solicitation covered by this subpart is sent to the consumer;
or (3) an inquiry or application by the consumer regarding a financial
product or service offered by that person during the three-month period
immediately preceding the date on which the consumer is sent a
solicitation covered by this subpart. The proposed definition generally
tracks the statutory definition contained in section 624 of the FCRA,
with certain revisions for clarity.
The Commission believes that, for purposes of this proposed
regulation, an inquiry should include any affirmative request by a
consumer for information, such that the consumer would reasonably
expect to receive information from the affiliate about its financial
products or services. In addition, the Commission believes that a
consumer would not reasonably expect to receive information from the
affiliate if the consumer does not request information or does not
provide contact information to the affiliate.
The Commission has the statutory authority to define in the
regulations other circumstances that qualify as a pre-existing business
relationship. The Commission has not proposed to exercise this
authority at this time to expand the definition of ``pre-existing
business relationship'' beyond the circumstances set forth in the
statute. The Commission solicits comments, however, on whether there
are other circumstances that the Commission should include within the
definition of ``pre-existing business relationship''.
Solicitation
Proposed paragraph (q) defines the term ``solicitation'' to mean
the marketing of a financial product or service initiated by a covered
affiliate to a particular consumer that is based on eligibility
information communicated to the covered affiliate by its affiliate and
is intended to encourage the consumer to purchase the covered
affiliate's financial product or service. A communication, such as a
telemarketing solicitation, direct mail, or e-mail, is a solicitation
if it is directed to a specific consumer based on eligibility
information. The proposed definition of solicitation does not, however,
include communications that are directed at the general public without
regard to eligibility information, even if those communications are
intended to encourage consumers to purchase
[[Page 66023]]
financial products and services from the person initiating the
communications. The proposed definition tracks the statutory definition
contained in section 624 of the FCRA, with certain revisions for
clarity.
The proposed definition of ``solicitation'' does not distinguish
between different mediums of communication. A determination of whether
a marketing communication constitutes a solicitation will depend upon
the facts and circumstances. The Commission has decided not to make
those determinations in this rulemaking.
The Commission has the statutory authority to determine by
regulation that other communications do not constitute a solicitation.
The Commission has decided to use the same definition of
``solicitation'' adopted by the Agencies, and as a result, has not
proposed to exercise its authority under section 624 at this time to
specify other communications that would not be deemed ``solicitations''
beyond the circumstances set forth in the statute.
The Commission solicits comment, however, on whether there are
other communications that the Commission should determine do not meet
the definition of ``solicitation.'' The Commission also solicits
comment on whether, and to what extent, various tools used in Internet
marketing, such as popup ads, may constitute solicitations as opposed
to communications directed at the general public, and whether further
guidance is needed to address Internet marketing.
Swap Dealer
Proposed paragraph (r) defines the term ``swap dealer'' to have the
same meaning as in section 1a(49) of the Commodity Exchange Act, as may
be further defined by the Commission's Regulations, and includes any
person registered as such thereunder.
Section 162.3--Affiliate Marketing Opt Out and Exceptions
Proposed section 162.3 establishes the basic rules governing the
requirement to provide the consumer with notice, a reasonable
opportunity and a simple method to opt out of a company's use of
eligibility information that it obtains from an affiliate for the
purpose of making solicitations to the consumer.
General Notice Requirement
Proposed paragraph (a) contains three conditions that must be met
before a covered affiliate that does not have a pre-existing business
relationship with a consumer may use eligibility information about the
consumer that it receives from a affiliate that does have such a
relationship to make a solicitation for marketing purposes to that
consumer. First, the proposal provides that it must be clearly and
conspicuously disclosed to the consumer in writing or, if the consumer
agrees, electronically, in a concise notice that the covered affiliate
that does not have a pre-existing business relationship may use shared
eligibility information to make solicitations to the consumer. Second,
the consumer must be provided a reasonable opportunity and a reasonable
and simple method to opt out of the use of that eligibility information
to make solicitations to the consumer. Third, the consumer must not
have opted out.
The Commission believes that an opt-out notice may not be provided
orally. Indeed, the Commission is concerned that with oral notice, it
may be impossible to ensure that a consumer receives the appropriate
notice or information on the right to opt out. In addition, the
Commission is concerned that oral notice may create enforcement
barriers for the Commission.
Persons Responsible for Satisfying the Notice Requirement
Section 624 does not specify explicitly which affiliate must
provide the opt-out notice to the consumer. Proposed paragraph (b) sets
forth the duty of the persons responsible for satisfying the notice
requirement under section 624. This proposal is consistent with the
approach taken by the Agencies in their respective rulemakings pursuant
to section 624. The proposed regulation strives to provide flexibility
by allowing either: (1) The affiliate with a pre-existing business
relationship to report the initial opt-out notice directly to the
consumer; or (2) one or more of affiliates to provide a joint notice to
the consumer, provided that at least one of the affiliates has or
previously had the pre-existing business relationship with the
consumer. The Commission solicits comments on whether this approach
will provide meaningful or effective notice and will not lead to
consumer confusion as to whether the opt-out notice is itself a
solicitation.
Exceptions to the General Rule
Paragraph (c) contains exceptions to the requirements of this
subpart. It incorporates each of the following statutory exceptions to
the affiliate marketing notice and opt-out requirements set forth in
section 624(a)(4) of the FCRA: (1) Using the information to make a
solicitation to a consumer with whom the affiliate has a pre-existing
business relationship; (2) using the information to facilitate
communications to an individual for whose benefit the affiliate
provides employee benefit or other services under a contract with an
employer related to, and arising out of, a current employment
relationship or an individual's status as a participant or beneficiary
of an employee benefit plan; (3) using the information to perform
services for another affiliate, unless the services involve sending
solicitations on behalf of the other affiliate and such affiliate is
not permitted to send such solicitations itself as a result of the
consumer's decision to opt out; (4) using the information to make
solicitations in response to a communication initiated by the consumer;
(5) using the information to make solicitations in response to a
consumer's request or authorization for a solicitation; or (6) if
compliance with the requirements of section 624 by the affiliate would
prevent that affiliate from complying with any provision of state
insurance laws pertaining to unfair discrimination in a state where the
affiliate is lawfully doing business. Several of these exceptions are
discussed immediately below.
Proposed paragraph (c)(1) clarifies that the provisions of this
subpart do not apply where the covered affiliate using the information
to make a solicitation to a consumer has a ``pre-existing business
relationship'' with that consumer, a key term that is discussed in
detail above.
Proposed paragraph (c)(3) clarifies that the provisions of this
subpart do not apply where the information is used to perform services
for another affiliate, except that the exception does not permit the
service provider to make solicitations on behalf of itself or an
affiliate if the service provider or the affiliate, as applicable,
would not be permitted to make such solicitations as a result of the
consumer's election to opt out. Thus, when the notice has been provided
to a consumer and the consumer has opted-out, a covered affiliate
subject to the consumer's opt-out election that has received
eligibility information from its affiliate may not circumvent the opt-
out notice requirement by instructing its affiliate or another
affiliate to make solicitations to the consumer on its behalf. The
Commission requests comment on whether there are other means of
circumvention that the final rule should also address.
Proposed paragraph (c)(4) incorporates the statutory exception for
information used in response to a communication initiated by the
consumer. The proposed rule clarifies
[[Page 66024]]
that this exception may be triggered by an oral, electronic, or written
communication initiated by the consumer. To be covered by the proposed
exception, use of eligibility information must be responsive to the
communication initiated by the consumer. For example, if a consumer
calls a covered affiliate to ask about business locations and hours,
the covered affiliate may not then use eligibility information to make
solicitations to the consumer about specific financial products or
services because those solicitations would not be responsive to the
consumer's communication. Conversely, if the consumer calls a covered
affiliate to ask about its financial products or services, then
solicitations related to those financial products or services would be
responsive to the communication and thus be permitted under the
exception. The time period during which solicitations remain responsive
to the consumer's communication will depend on the facts and
circumstances. The Commission does not intend for this exception to
apply to a communication where a covered affiliate makes the initial
call and leaves a message for the consumer to call back, and the
consumer responds.
Proposed paragraph (c)(5) provides that the provisions of this
subpart do not apply where the information is used to make
solicitations affirmatively authorized or requested by the consumer.
This provision may be triggered by an oral, electronic, or written
authorization or request by the consumer. Under this exception, the
consumer may provide the authorization or make the request either
through the company with whom the consumer has a business relationship
or directly to the covered affiliate that will make the solicitation.
In addition, the duration of the authorization or request will depend
on the facts and circumstances.
The exceptions in proposed paragraphs (c)(1), (4), and (5)
described above may overlap in certain situations. For example, if a
customer makes a telephone call to the commodity trading advisor's
clearing broker affiliate and requests information about its services,
the clearing broker affiliate may use information about the consumer it
obtains from the commodity trading advisor to make solicitations in
response to the telephone call initiated by the consumer under the
exception in paragraph (c)(4) for responding to a communication
initiated by the consumer. In addition, the consumer's request for
information from the clearing broker affiliate triggers the exceptions
in paragraph (c)(1) for inquiries by the consumer regarding a financial
product or service offered by the clearing broker affiliate under the
statutory definition of a ``pre-existing business relationship'' as
well as the exception in paragraph (c)(5) for a use in response to a
solicitation requested by the consumer.
Making Solicitations
Proposed paragraph (d) sets forth when a covered affiliate makes a
solicitation to a consumer. Section 624 does not describe what a
covered affiliate must do in order to make a solicitation. Similarly
the legislative history does not contain guidance as to the meaning of
making a solicitation. For that reason, the Commission believes it
important to provide clear guidance regarding what activities
constitute making a solicitation. Proposed section 162.3(d)(1) provides
that a covered affiliate makes a solicitation for marketing purposes to
a consumer if: (i) The covered affiliate receives eligibility
information from an affiliate; (ii) the covered affiliate uses that
eligibility information to do one of the following--identify the
consumer or type of consumer to receive a solicitation, establish the
criteria used to select the consumer to receive a solicitation, or
decide which of its financial products or services to market to the
consumer or tailor its solicitation to that consumer; and (iii) as a
result of the covered affiliate's use of the eligibility information,
the consumer is provided a solicitation about the covered affiliate's
financial products or services.
The Commission recognizes that several common industry practices
create issues in applying the provisions in proposed subparagraph
(d)(1). First, affiliated companies often use a common database as the
repository for eligibility information obtained by various affiliates,
and information in that database may be accessible to multiple
affiliates. Second, affiliated companies often use service providers to
perform marketing activities, and some of those service providers may
provide services for a number of different affiliates. Third, a covered
affiliate may use its own eligibility information to market the
financial products or services of another affiliate. Proposed sections
162.3(d)(2)-(5) seek to address these issues.
Proposed subparagraph (d)(2) provides that a covered affiliate may
receive eligibility information from an affiliate in various ways,
including when the covered affiliate places that information into a
common database that the covered affiliate may access. Thus, the use of
a common database may satisfy the first element of the rule outlined in
subparagraph (d)(1) (i.e., through a common database, the covered
affiliate receives eligibility information from an affiliate).
Proposed subparagraph (d)(3) provides that a covered affiliate
receives or uses an affiliate's eligibility information if a service
provider acting on behalf of the covered affiliate receives or uses
that information in the manner described in subparagraphs (d)(1)(i) or
(d)(1)(ii), except as provided in subparagraph (d)(5), which is
discussed below. Proposed subparagraph (d)(3) also provides that all
relevant facts and circumstances will determine whether a service
provider is acting on behalf of a covered affiliate when it receives or
uses its affiliate's eligibility information in connection with
marketing the covered affiliate's financial products or services.
Proposed subparagraph (d)(4) describes two situations where a
covered affiliate is deemed not to have made a solicitation subject to
this subpart. In particular, this section provides that unless a
covered affiliate uses a consumer's eligibility information received
from an affiliate in a manner described in section 162.3(d)(1)(ii)
(i.e., identify the consumer, establish criteria to select the
consumer, or decide which financial product or service to market to the
consumer), the covered affiliate does not make a solicitation for the
purposes of this subpart if the affiliate: (i) uses its own eligibility
information obtained in connection with that relationship to market the
covered affiliate's financial products or services; or (ii) directs its
service provider to use the affiliate's own eligibility information to
market the covered affiliate's financial products or services. Both
situations (i) and (ii) assume that the covered affiliate whose
financial products or services are being marketed has not used
eligibility information received from the affiliate. In contrast, the
core concept underlying situation (ii) is that the affiliate controls
the actions of the service provider using that information. Since the
affiliate controls the service provider's use of the eligibility
information, the solicitation should not be attributed to the covered
affiliate whose financial products or services will be marketed to the
consumers. Instead, the solicitation should be attributed to the
affiliate.
The Commission also recognizes that there may be situations where
the covered affiliate whose financial products or services are being
marketed does communicate and have contact
[[Page 66025]]
with the service provider of the affiliate. This situation might arise,
for example, where the service provider performs services for various
affiliates relying on information maintained in and accessed from a
common database. In certain circumstances, the covered affiliate whose
financial products or services are being marketed may communicate with
the service provider, yet the service provider is still acting on
behalf of the affiliate when it uses that affiliate's eligibility
information in connection with marketing the covered affiliate's
financial products or services. Proposed subparagraph (d)(5) describes
the conditions under which a service provider (including an affiliated
or third-party service provider) would be deemed to be acting on behalf
of the affiliate that has or previously had a pre-existing business
relationship with a consumer, rather than the covered affiliate whose
financial products or services are being marketed, notwithstanding
direct communications between the covered affiliate and the service
provider.
Proposed subparagraph (d)(5) builds upon the concept of control of
a service provider and thus is a natural outgrowth of proposed
subparagraph (d)(4). Under the conditions set out in subparagraph
(d)(5), the service provider is acting on behalf of an affiliate that
obtained the eligibility information in connection with a pre-existing
business relationship with the consumer because, inter alia, the
affiliate controls the actions of the service provider in connection
with the service provider's receipt and use of the eligibility
information. This provision is designed to minimize uncertainty that
may arise from application of the facts and circumstances test in
subparagraph (d)(3) to cases that involve direct communications between
a service provider and a covered affiliate whose financial products and
services will be marketed to consumers.
In particular, proposed subparagraph (d)(5) provides that a covered
affiliate does not make a solicitation subject to this subpart if a
service provider receives eligibility information (regardless of
whether such information is received through a common database or
otherwise) from an affiliate and the service provider uses that
eligibility information to market the covered affiliate's financial
products or services to the consumer, only when five conditions are
met.
Those five conditions are:
First, the affiliate controls access to and use of its
eligibility information by the service provider (including the right to
establish specific terms and conditions under which the service
provider may use such information to market the financial products or
services of the covered affiliate that does not have such
relationship). This requirement must be set forth in a written
agreement between the affiliate and the service provider. The affiliate
may demonstrate control by, for example, establishing and implementing
reasonable policies and procedures applicable to the service provider's
access to and use of its eligibility information.
Second, the affiliate establishes specific terms and
conditions under which the service provider may access and use that
eligibility information to market the financial products or services of
the covered affiliate that does not have a pre-existing business
relationship (or those of affiliates generally) to the consumer, and
periodically evaluates the service provider's compliance with those
terms and conditions. These terms and conditions may include the
identity of the affiliated companies whose financial products or
services may be marketed to the consumer by the service provider, the
types of financial products or services of affiliated companies that
may be marketed, and the number of times the consumer may receive
marketing materials. The affiliate must set forth in writing the
specific terms and conditions, but need not set forth such terms and
conditions in a written agreement. If a periodic evaluation by the
affiliate that has or previously had a pre-existing business
relationship with a consumer reveals that the service provider is not
complying with those terms and conditions, the Commission expects the
affiliate to take appropriate corrective action.
Third, the affiliate requires the service provider to
implement reasonable policies and procedures designed to ensure that
the service provider uses its eligibility information in accordance
with the terms and conditions established by the such affiliate
relating to the marketing of the financial products or services of the
covered affiliate that does not have a pre-existing business
relationship. This requirement must be set forth in a written agreement
between the affiliate and the service provider.
Fourth, the affiliate that has or previously had a pre-
existing business relationship with a consumer is identified on or with
the marketing materials provided to the consumer. This requirement will
be construed flexibly. For example, the affiliate may be identified
directly on the marketing materials, on an introductory cover letter,
on other documents included with the marketing materials, such as a
periodic statement, or on the envelope which contains the marketing
materials.
Fifth, the covered affiliate that does not have a pre-
existing business relationship with the consumer does not directly use
the eligibility information of the affiliate that does have such
relationship in the manner described in section 162.3(d)(1)(ii). These
five conditions together ensure that the service provider is acting on
behalf of the affiliate because that affiliate controls the service
provider's receipt and use of such affiliate's eligibility information.
Section 162.4--Scope and Duration of Opt Out
Scope of Opt Out
The scope of the opt-out election is derived from language of
section 624(a)(2)(A) of the FCRA and generally depends upon the content
of the opt-out notice. Proposed section 162.4(a)(1) provides that,
except as otherwise provided in that section, a consumer's election to
opt out prohibits any covered affiliate subject to the scope of the
opt-out notice from using the eligibility information received from
another affiliate as described in the notice to make solicitations for
marketing purposes to the consumer. The scope of the election in the
proposed regulations is consistent with the scope of the final
regulations promulgated by the Agencies.
Proposed section 162.4(a)(2)(i) clarifies that, in the context of a
continuing relationship, an opt-out notice may apply to eligibility
information obtained in connection with a single continuing
relationship, multiple continuing relationships, continuing
relationships established subsequent to delivery of the opt-out notice,
or any other transaction with the consumer. Proposed section
162.4(a)(2)(ii) provides the following examples of a continuing
relationship: (i) The covered affiliate is a futures commission
merchant through whom a consumer has opened an account, or that carries
the consumer's account on a fully-disclosed basis, or that effects or
engages in commodity interest transactions with or for a consumer, even
if the covered affiliate does not hold any assets of the consumer; (ii)
the covered affiliate is an introducing broker that solicits or accepts
specific orders for trades; (iii) the covered affiliate is a commodity
trading advisor with whom a consumer has a contract or subscription,
either written or oral, regardless of whether the advice is
standardized, or is based on, or tailored
[[Page 66026]]
to, the commodity interest or cash market positions or other
circumstances or characteristics of the particular consumer; (iv) the
covered affiliate is a commodity pool operator, and accepts or receives
from the consumer, funds, securities, or property for the purpose of
purchasing an interest in a commodity pool; (v) the covered affiliate
holds securities or other assets as collateral for a loan made to the
consumer, even if the covered affiliate did not make the loan or do not
affect any transactions on behalf of the consumer; or (vi) the covered
affiliate regularly effects or engages in commodity interest
transactions with or for a consumer even if covered affiliate does not
hold any assets of the consumer.
Proposed section 162.4(a)(3)(i) limits the scope of an opt-out
notice that is not connected with a continuing relationship. This
section provides that if there is no continuing relationship between
the consumer and a covered affiliate or its affiliate, and if the
covered affiliate or its affiliate provides an opt-out notice to a
consumer that relates to eligibility information obtained in connection
with a transaction with the consumer, such as an isolated transaction,
the opt-out notice only applies to eligibility information obtained in
connection with that transaction. The notice cannot apply to
eligibility information that may be obtained in connection with
subsequent transactions or a continuing relationship that may be
subsequently established by the consumer with the covered affiliate or
its affiliate. Proposed section 162.4(a)(3)(ii) provides the following
examples of where no continuing relationship exists: (i) The covered
affiliate has acted solely as a ``finder'' for a futures commission
merchant, and the covered affiliate does not solicit or accept specific
orders for trades; or (ii) the covered affiliate has solicited the
consumer to participate in a pool or to direct his or her account and
he or she has not provided the covered affiliate with funds to
participate in a pool or entered into any agreement with the covered
affiliate to direct his or her account.
Proposed section 162.4(a)(4) provides that a consumer may be given
the opportunity to choose from a menu of alternatives when electing to
prohibit solicitations. An opt-out notice may give the consumer the
opportunity to elect to prohibit: solicitations from certain types of
affiliates covered by the opt-out notice but not other types of
affiliates covered by the notice; solicitations based on certain types
of eligibility information but not other types of eligibility
information; or solicitations by certain methods of delivery but not
other methods of delivery, so long as one of the alternatives is the
opportunity to prohibit all solicitations from all of the affiliates
that are covered by the notice. The Commission believes that the
language of section 624(a)(2)(A) of the FCRA requires the opt-out
notice to contain a single opt-out option for all solicitations within
the scope of the notice. The Commission solicits comments as to whether
it would be burdensome for consumers to receive a number of different
opt-out notices, even from the same affiliate, under the circumstances
described above.
Proposed section 162.4(a)(5) contains a special rule for notice
following termination of a continuing relationship. This proposed
regulation provides that a consumer must be given a new opt-out notice
if, after all continuing relationships with a covered affiliate or its
affiliate have been terminated, the consumer subsequently establishes a
new continuing relationship with the covered affiliate or the same or a
different affiliate and the consumer's eligibility information is used
to make a solicitation. In addition, this section affords the consumer
and the company a fresh start following termination of all continuing
relationships by requiring a new opt-out notice if a new continuing
relationship is subsequently established.
The new opt-out notice must apply, at a minimum, to eligibility
information obtained in connection with the new continuing
relationship. The new opt-out notice may apply more broadly to
information obtained in connection with a terminated relationship and
give the consumer the opportunity to opt out with respect to
eligibility information obtained in connection with both the terminated
and the new continuing relationships. Further, the consumer's failure
to opt out does not override a prior opt-out election by the consumer
applicable to eligibility information obtained in connection with a
terminated relationship that is still in effect, regardless of whether
the new opt-out notice applies to eligibility information obtained in
connection with the terminated relationship. The Commission notes,
however, that where a consumer was not given an opt-out notice in
connection with the initial continuing relationship because eligibility
information obtained in connection with that continuing relationship
was not shared with affiliates for use in making solicitations, an opt-
out notice provided in connection with a new continuing relationship
would have to apply to any eligibility information obtained in
connection with the terminated relationship that is to be shared with
affiliates for use in making future solicitations.
Duration of Opt-Out Election
Proposed section 162.4(b) provides that an opt-out election must be
effective for a period of at least five years beginning when the
consumer's opt-out election is received and implemented, unless the
consumer subsequently revokes the opt-out election in writing or, if
the consumer agrees, electronically. The Commission believes that this
approach is consistent with the approach taken by the Agencies and the
Commission's approach in the GLB Act privacy rule in Part 160. The
Commission does not believe it is necessary or appropriate to permit
oral revocation.
The Commission believes that this approach provides companies with
flexibility in complying with the proposed regulations. For example, to
avoid the cost and burden of tracking consumer opt outs over five-year
periods with varying start and end dates and sending out extension
notices in five-year cycles, some companies may choose to treat the
consumer's opt-out election as effective for a period longer than five
years, including in perpetuity, unless revoked by the consumer. A
company that chooses to honor a consumer's opt-out election for more
than five years would not violate the proposed regulations.
The Commission seeks comment on whether the consumers should be
given the opportunity to opt-out permanently from receiving marketing
solicitations from affiliates regardless of the opt-out period stated
in the opt-out notice. This approach would provide consumers with the
ability to avoid receiving and responding to extension notices every
five years.
Time Period To Opt Out
Proposed section 162.4(c) provides that a consumer may opt out at
any time. Indeed, a consumer may opt out even if the consumer did not
opt out in response to the initial opt-out notice or if the consumer's
election to opt out was not prompted by an opt-out notice. Regardless
of when the consumer opts out, the opt out must be effective for a
period of at least five years.
No Effect on Opt-Out Period
Proposed section 162.4(d) provides that an opt-out period may not
be shortened by sending a renewal notice to the consumer before
expiration of the opt-out period, even if the consumer does not renew
the opt out.
[[Page 66027]]
Section 162.5--Contents of Opt-Out Notice; Consolidated and Equivalent
Notices
Contents in General
The Commission believes that proposed section 162.5(a) reflects the
intent of Congress, as expressed in section 624(a)(2)(B) of the FCRA,
which provides that the notice required by this proposed regulation
must be in writing, ``clear, conspicuous, and concise,'' and that the
method for opting out must be ``simple.'' Specifically, section
162.5(a)(1)(i)(A) provides that all opt-out notices must identify, by
name, the affiliate that has or previously had a pre-existing business
relationship with a consumer and is providing the notice. Section
162.5(a)(1)(B) provides that a group of affiliates may jointly provide
the notice. If the notice is provided jointly by multiple affiliates
and each affiliate shares a common name, then the notice may indicate
that it is being provided by multiple companies with the same name or
multiple companies in the same group or family of companies. Acceptable
ways of identifying the multiple affiliates providing the notice
include stating that the notice is provided by ``all of the XYZ
companies,'' or by listing the name of each affiliate providing the
notice. A representation that the notice is provided by ``the XYZ
commodity trading advisors and commodity pools'' applies to all
companies in those categories, not just some of those companies. But if
the affiliates providing the notice do not all share a common name,
then the notice must either separately identify each affiliate by name
or identify each of the common names used by those affiliates.
Proposed section 162.5(a)(1)(ii) provides that an opt-out notice
must contain a list of the affiliates or types of affiliates covered by
the notice. The notice may apply to multiple affiliates and to
companies that become affiliates after the notice is provided to the
consumer. The rule for identifying the affiliates covered by the notice
is substantially similar to the rule for identifying the affiliates
providing the notice in section 162.5(a)(i), as described in the
previous paragraph.
Proposed sections 162.5(a)(1)(iii)-(vii), respectively, require the
opt-out notice to include the following: A general description of the
types of eligibility information that may be used to make solicitations
to the consumer; a statement that the consumer may elect to limit the
use of eligibility information to make solicitations to the consumer; a
statement that the consumer's election will apply for the specified
period of time stated in the notice and, if applicable, that the
consumer will be allowed to renew the election once that period
expires; if the notice is provided to consumers who may have previously
opted out, that the consumer who has chosen to limit marketing offers
does not need to act again until the consumer receives a renewal
notice; and a reasonable and simple method for the consumer to opt out.
Proposed section 162.5(a)(2) provides that the opt-out notice must
specify the length of the opt-out period, if the consumer is granted an
opt-out period longer than five years. Proposed section 162.5(a)(3),
however, provides that a company that subsequently chooses to increase
the duration of the opt-out period that it previously disclosed or
honor the opt out in perpetuity has no obligation to provide a revised
notice to the consumer. In that case, the result is the same as if the
company established a five-year opt-out period and then did not send a
renewal notice at the end of that period. So long as no solicitations
are made using eligibility information received from an affiliate,
there would be no violation of the statute or regulation for failing to
send a renewal notice in this situation. A covered affiliate receiving
eligibility information from an affiliate would be prohibited from
using that information to make solicitations to a consumer unless a
renewal notice is first provided to the consumer and the consumer does
not renew the opt out.
Use of the model form in Appendix A, in appropriate circumstances,
would comply with paragraph (a), but is not required.
Joint Relationships
Proposed section 162.5(b) sets out a rule that would apply when two
or more consumers jointly obtain a financial product or service from an
affiliate subject to the rule (referred to in the proposed regulation
as ``joint consumers''). Under the proposal, an affiliate subject to
the rule could provide a single opt-out notice to joint consumers. The
notice would have had to indicate whether the affiliate would consider
an opt out by a joint consumer as an opt out by all of the associated
consumers, or whether each consumer would have to opt out separately.
The affiliate could not require all consumers to opt out before
honoring an opt-out election by one of the joint consumers. The revised
provision is substantively similar to the joint relationships provision
of the GLB Act privacy rule in Part 160, except to the extent that rule
refers to the sharing of information among affiliates. The Commission
requests comments on whether information about a joint account should
be allowed to be used for making solicitations to a joint consumer who
has not opted out.
Alternative Contents
Proposed paragraph (c) provides that if the consumer is afforded an
alternative but broader right to opt out of receiving marketing than is
required by this subpart, the requirements of proposed section 162.5(a)
may be satisfied by providing the consumer with a clear, conspicuous,
and concise notice that accurately discloses the consumer's opt-out
rights.
Consolidated and Equivalent Notices
Proposed section 162.5(d) provides that an opt-out notice required
by this subpart could be coordinated and consolidated with any other
notice or disclosure required to be issued under any other provision of
law, including but not limited to the notice required by Title V of the
GLB Act. In addition, proposed section 162.5(e) provides that a notice
or other disclosure that is equivalent to the notice required by this
subpart, and that is provided to a consumer together with disclosures
required by any other provision of law, would satisfy the requirements
of this section.
Including an affiliate marketing opt-out notice under this subpart
and an initial or annual notice under the GLB Act raises special
issues, however, because GLB Act notices typically state that the
consumer does not need to opt out again if the consumer previously
opted-out. This statement would be accurate if the company and its
affiliates choose to make the affiliate marketing opt out effective in
perpetuity. However, if the opt-out period is limited to a defined
period of five years or more, such a statement would not be accurate
with respect to the extension notice, and the notice would have to make
clear to the consumer the necessity of opting-out again in order to
extend the opt-out election.
The Commission solicits comments on the consolidation of the
affiliate marketing notice under this subpart with the GLB Act privacy
notices in Part 160.
Model Notices
Proposed section 162.5(f) states that proposed model notices are
provided in Appendix A of Part 162. The Commission has provided these
proposed model notices to facilitate compliance with the proposed rule.
It should be noted, however, that the
[[Page 66028]]
proposed rule does not require use of the model notices.
Section 162.6--Reasonable Opportunity to Opt Out
Proposed paragraph (a) sets forth the general rule prohibiting
covered affiliates from using eligibility information about a consumer
received from an affiliate to make a solicitation to such consumer
about the covered affiliate's financial products or services, unless
the consumer is provided a reasonable opportunity to opt out, as
required by the proposed regulation. The general rule does not set a
mandatory waiting period in all cases. Instead, proposed paragraph (b)
sets forth several examples illustrating what constitutes a reasonable
opportunity to opt out. Paragraph (b) does maintain, however, a safe
harbor of 30 days to provide certainty to entities that choose to
follow the 30-day waiting period. Although 30 days is a safe harbor in
all cases, an affiliate subject to the rule providing an opt-out notice
may decide, at its option, to give consumers more than 30 days in which
to decide whether to opt out. A shorter waiting period could be
adequate in certain situations, depending on the circumstances, in
accordance with the general test for a reasonable opportunity to opt
out.
Section 162.7--Reasonable and Simple Methods of Opting Out
Section 624 of the FCRA requires that consumers are given
reasonable and simple methods of opting out. Proposed paragraph (a)
prohibits covered affiliates from using eligibility information about a
consumer received from an affiliate to make a solicitation to such
consumer about the financial products or services of the covered
affiliate, unless the consumer is provided a reasonable and simple
method to opt out, as required by this proposed regulation.
Proposed paragraph (b) sets forth reasonable and simple methods of
opting out. Such methods include designating a check-off box in a
prominent position on an opt-out election form, including a reply form
and a self-addressed envelope (in a mailing), providing an electronic
means that can be electronically mailed or processed through an
Internet Web site, providing a toll-free telephone number, or
exercising an opt-out election through whatever means are acceptable
under a consolidated privacy notice required under other laws.
Proposed paragraph (c) clarifies that each consumer may be required
to opt out through a specific medium, as long as that medium is
reasonable and simple for that consumer.
Section 162.8--Acceptable Delivery of Opt-Out Notices
Proposed section 162.8(a) provides that an affiliate that has or
previously had a pre-existing business relationship with a consumer
must deliver an opt-out notice so that each consumer can reasonably be
expected to receive actual notice. For opt-out notices that are
delivered electronically at the consumer's election, proposed section
162.8(b) provides that opt-out notices may be delivered either in
accordance with the electronic disclosure provisions in section 101 of
the Electronic Signatures in Global and National Commerce Act, 15
U.S.C. 7001 et seq. or in accordance with CFTC Regulation 1.4.
Section 162.9--Renewal of Opt Out
Proposed section 162.9 describes the procedures for renewal or
extension of an opt-out election. Proposed subparagraph (a)(1) provides
that, after the opt-out period expires, and unless an exception in
section 162.3(c) applies, a covered affiliate may not make a
solicitation to a consumer based on eligibility information received by
an affiliate unless: The consumer has been given a renewal notice that
complies with requirements of this section and the other sections 162.6
through 162.8; the consumer is given a reasonable opportunity and a
reasonable and simple to renew the opt-out election; and the consumer
does not opt out. Proposed subparagraph (a)(2) provides that the
renewal period for each renewal shall be a period of not less than five
years. Proposed subparagraph (a)(3) outlines which affiliates may
provide notice required by this section. A renewal notice must be
provided either by: The affiliate that provided the previous opt-out
notice or its successor; or as part of a joint renewal notice from two
or more members of an affiliated group of companies, or their
successors, that jointly provided the previous opt-out notice. The
Commission believes that this subparagraph will provide flexibility to
account for changes in the corporate structure, which may result from
mergers and acquisitions, corporate names changes, and other events.
Proposed paragraph (b) addresses the contents of a renewal or
extension notice. The Commission recognizes that the content of the
renewal notice differs from the content of the initial notice. Nothing
in the FCRA, however, requires identical content in the initial and
renewal notices. Moreover, the FCRA requires the Commission to provide
specific guidance to ensure that opt-out notices are clear, conspicuous
and concise. The Commission believes that it is unreasonable to expect
consumers, upon receipt of a renewal notice, to remember that they
previously opted out five years ago (or longer) or, even if they do
remember, to know that they must opt out again in order to renew their
opt-out election. Therefore, to ensure that the renewal notice is
meaningful, the Commission is proposing that the renewal notice must
remind the consumer he or she must opt out again to renew the opt-out
election and continue to limit the solicitations from covered
affiliates. In addition, proposed paragraph (b) requires that the
notice must accurately disclose the same items required to be disclosed
in the initial opt-out notice under proposed section 162.5(a), along
with a statement explaining that the consumer's prior opt-out election
has expired or is about to expire, as applicable, and that if the
consumer wishes to keep the consumer's opt-out election in force, the
consumer must opt out again.
Proposed paragraph (c) addresses the timing of the renewal notice
and provides that a renewal notice can be given to the consumer either
a reasonable period of time before the expiration of the opt-out
period, or any time after the expiration of the opt-out period but
before solicitations that would have been prohibited by the expired
opt-out election are made to the consumer. Providing the renewal notice
to a consumer within a reasonable period of time before the expiration
of the opt-out period is appropriate to facilitate the smooth
transition of consumers that choose to change their election. A renewal
notice given too far in advance of the expiration of the opt-out
period, however, may be confusing to consumers. The Commission does not
propose to set a fixed time for what would constitute a reasonable
period of time before the expiration of the opt-out period to send a
renewal notice, because a reasonable period of time may depend upon the
amount of time afforded to the consumer for a reasonable opportunity to
opt out, the amount of time necessary to process opt outs, and other
factors. Nevertheless, providing a renewal notice on or with the last
annual privacy notice required by the GLB Act privacy provisions sent
to the consumer before the expiration of the opt-out period shall be
deemed reasonable in all cases.
Proposed paragraph (d) clarifies that sending a renewal notice to
the consumer before the expiration of the opt-out period does not
shorten the five-
[[Page 66029]]
year opt-out period, even if the consumer does not renew the opt-out
election.
B. Disposal Rules
As noted above, section 1088 of the Dodd-Frank Act also amends
section 628 of the FCRA, which directs the Commission to adopt
comparable and consistent rules with the Agencies regarding the
disposal of sensitive consumer report information. The purpose of these
rules is to reduce the risk of identity theft and other consumer harm
from improper disposal of a consumer report or any record derived from
one. The proposed disposal rules apply to any CFTC registrant that, for
a business purpose, maintains or otherwise possesses such consumer
report information.
The general disposal requirement provides that CFTC registrants
covered by the proposed regulation ``take reasonable measures to
protect against unauthorized access to or use of the information in
connection with its disposal.'' The standard for disposal is flexible
to allow CFTC registrants to determine what measures are reasonable
based on the sensitivity of the information, the costs and benefits of
different disposal methods, and relevant changes in technology over
time. The proposed disposal rule's flexibility should also facilitate
compliance for smaller CFTC registrants.
In the discussion that follows, the Commission solicits comment on
specific aspects of the proposed disposal rules on a section-by-section
basis.
Section 162.2--Definitions
In addition to the definitions previously discussed above, the
proposed regulations to implement section 628 of the FCRA require the
addition of the following terms to the definition section of the new
Part 162.
Consumer Information
Proposed paragraph (h) defines the term ``consumer information'' to
mean any record about an individual, whether in paper, electronic, or
other form that is a consumer report or is derived from a consumer
report.\14\ Consumer information also means a compilation of such
records. Consumer information does not include information that does
not identify individuals, such as aggregate information or blind data.
The Commission believes that a broad definition of the term, which
includes all types of records that are consumer reports, or contain
consumer information derived from consumer reports, will best
effectuate the purposes of the FCRA. However, under this definition,
information which does not identify a particular consumer would not be
included. The Commission believes that limiting the definition to
information which identifies particular consumers is consistent with
the purpose of the FCRA.
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\14\ The term ``consumer report'' is defined in section
603(d)(1) of the FCRA as ``any written, oral, or other communication
of any information by a consumer reporting agency bearing on a
consumer's credit worthiness, credit standing, credit capacity,
character, general reputation, personal characteristics, or mode of
living which is used or expected to be used or collected in whole or
in part for the purpose of serving as a factor in establishing the
consumer's eligibility for [several purposes, including employment,
the provision of credit or insurance].''
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Dispose or Disposal
Proposed paragraph (i) defines the terms ``dispose'' or
``disposal'' to mean the discarding or abandonment of consumer
information or the sale, donation, or transfer of any medium, including
computer equipment, upon which consumer information is stored. The
sale, donation, or transfer of consumer information would not be
considered ``disposal'' under the proposed regulation. For example, an
entity subject to the proposed disposal rule that transfers consumer
information to a third party for marketing purposes would not be
discarding the information for the purposes of the proposed disposal
rule. If the entity donates computer equipment on which consumer
information is stored, however, the donation would be considered a
disposal under the proposed disposal rule. The Commission requests
comments on this definition.
Section 162.21--Disposal Rules
Proposed section 162.21 implements section 628(a)(1) of the FCRA.
Proposed paragraph (a) would require any covered affiliate to adopt
must adopt reasonable, written policies and procedures that address
administrative, technical, and physical safeguards for the protection
of consumer information. The proposal requires these written policies
and procedures to be reasonably designed to: (1) Insure the security
and confidentiality of consumer information; (2) protect against any
anticipated threats or hazards to the security or integrity of consumer
information; and (3) protect against unauthorized access to or use of
consumer information that could result in substantial harm or
inconvenience to any consumer.
Proposed paragraph (b) would require that any person that maintains
or otherwise possesses consumer information to take ``reasonable
measures to protect against unauthorized access to or use of the
information in connection with its disposal.'' The Commission
recognizes that there are few foolproof methods of record destruction.
Therefore, the proposed regulation does not require persons subject to
the rule to ensure perfect destruction of consumer information in every
instance; rather, it requires covered entities to take reasonable
measures to protect against unauthorized access to or use of the
information in connection with its disposal.
In determining what measures are ``reasonable'' under this subpart,
the Commission expects that entities within the scope of the proposed
regulation would consider the sensitivity of the consumer information,
the nature and size of the entity's operations, the costs and benefits
of different disposal methods, and relevant technological changes.
``Reasonable measures'' are very likely to require elements such as the
establishment of policies and procedures governing disposal, as well as
appropriate employee training.
The flexible standard for disposal in the proposed rule would allow
persons subject to the rule to make decisions appropriate to their
particular circumstances and should minimize the disruption of existing
practices to the extent that they already provide appropriate
protections for consumers. It is also intended to minimize the burden
of compliance for smaller entities.
Despite the benefits of a flexible ``reasonableness'' standard, the
Commission recognizes that such a standard could leave entities within
the scope of the proposed regulations with some uncertainty about
compliance. While each entity would have to evaluate what is
appropriate for its size and the complexity of its operations, proposed
paragraph (c) sets forth the following examples of what the Commission
believes constitute ``reasonable'' disposal measures for purposes of
the proposed regulation:
Implementing and monitoring compliance with policies and
procedures that require the burning, pulverizing, or shredding of
papers containing consumer information so that the information cannot
practicably be read or reconstructed;
Implementing and monitoring compliance with policies and
procedures that require the destruction or erasure of electronic media
containing consumer information so
[[Page 66030]]
that the information cannot practically be read or reconstructed; and
After due diligence, entering into and monitoring
compliance with a written contract with another party engaged in the
business of record destruction to dispose of consumer information in a
manner that is consistent with this rule.
The Commission invites comment on the proposed standard for
disposal. In particular, the Commission seeks comment on whether the
proposed ``reasonableness'' standard provides sufficient guidance to
CFTC registrants. The Commission also seeks comment on whether the
proposed disposal rule should include alternative standards, specify
particular disposal methods, or should provide examples, and what those
examples should be.
Proposed paragraph (d) makes clear that nothing in the proposed
disposal rule is intended to create a requirement that a covered entity
maintain or destroy any record pertaining to an individual. The rule
also is not intended to affect any requirement imposed under any other
provision of law to maintain or destroy such records, particularly the
record keeping requirements located in Part 1 of the Commission's
Regulations.
C. Effective Date
Pursuant to section 1100H of the Dodd-Frank Act, the Commission
proposes to make the proposed regulations--the affiliate marketing
rules and the disposal rules--become effective on the ``designated
transfer date'' of authority from various Federal agencies to the
Bureau. Section 1062 of the Dodd-Frank Act provides that the
``designated transfer date'' is a date designated in the Federal
Register no later than 60 days after the enactment of the Dodd-Frank
Act by the Secretary of the Treasury, the Chairman of the Board of
Governors, the Chairman of the Federal Trade Commission, and several
other Federal agencies.\15\ On September 20, 2010, these Federal
agencies issued a notice designating July 21, 2011 as the designated
transfer date.\16\ As a result, the Commission proposes to adopt the
affiliate marketing rules and the disposal rules on that date.
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\15\ The heads of the other Federal agencies are: The
Comptroller of the Currency; the Director of the Office of Thrift
Supervision; the Secretary of the Department of Housing and Urban
Development; the Director of the Office of Management and Budget;
the Chairman of the National Credit Union Administration Board; and
the Chairperson of the Corporation.
\16\ See 75 FR 57252-02 (Sept. 20, 2010).
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III. Cost-Benefit Analysis
Section 15(a) of the CEA \17\ requires the Commission to consider
the costs and benefits of its actions before issuing an order under the
CEA. By its terms, section 15(a) does not require the Commission to
quantify the costs and benefits of an order or to determine whether the
benefits of the order outweigh its costs; rather, it requires that the
Commission ``consider'' the costs and benefits of its actions. Section
15(a) further specifies that the costs and benefits shall be evaluated
in light of five broad areas of market and public concern: (1)
Protection of market participants and the public; (2) efficiency,
competitiveness and financial integrity of futures markets; (3) price
discovery; (4) sound risk management practices; and (5) other public
interest considerations. The Commission may in its discretion give
greater weight to any one of the five enumerated areas and could in its
discretion determine that, notwithstanding its costs, a particular
order is necessary or appropriate to protect the public interest or to
effectuate any of the provisions or accomplish any of the purposes of
the CEA.
---------------------------------------------------------------------------
\17\ 7 U.S.C. 19(a).
---------------------------------------------------------------------------
The proposed regulations would implement new statutory provisions
enacted by Title X of the Dodd-Frank Act. These proposed regulations
would require CFTC registrants to do two things with respect to certain
consumer information. First, the proposed regulations would require
CFTC registrants to provide consumers with the opportunity to prohibit
affiliates from using certain information to make marketing
solicitations to consumers. Second, the proposed rules would require
CFTC registrants that possess or maintain consumer report information
in connection with their business activities to develop and implement a
written program for the proper disposal of such information.
With respect to costs, the Commission has determined that costs to
market participants would be de minimis because: (1) The Commission is
providing model notices in the proposed regulations in order to assist
these participants in complying with the affiliate marketing rules; (2)
the affiliate marketing rules only require periodic notice (i.e., at a
maximum, companies would have to provide notice to a consumer once
every five years; at a minimum, companies would have to provide notice
only once per consumer); (3) market participants can file consolidated
and equivalent notices in order to comply with the affiliate marketing
rules; and (4) the disposal rules were designed to provide market
participants with the greatest flexibility in the development and
implementation of a disposal program (which may vary according to a
company's size and the complexity of its operations, the costs and
benefits of available disposal methods, and the sensitivity of
information involved). The Commission also has determined that the
costs to the general public are: (1) Absent the implementation of the
affiliate marketing rules, consumers would have no control over both
the use of their personal information, and the number of solicitations
such consumers would receive from affiliates of company with which they
have a pre-existing business relationship; and (2) absent the
implementation of the disposal rules, would increase the chances that
consumer information would be accessible to third parties who may use
such information for identity theft or other unlawful purposes.
With respect to benefits, the Commission has determined that,
through the implementation of the affiliate marketing rules, consumers
generally will be able to opt out of receiving unsolicited and targeted
materials from businesses with which the consumers have no pre-existing
business relationship. In addition, the Commission has determined that,
as a result of the implementation of the disposal rules, the potential
for the misuse of consumer information will greatly decrease.
The Commission invites public comment on its cost-benefit
considerations. Commenters are also are invited to submit any data or
other information that they may have quantifying or qualifying the
costs and benefits of the proposed regulations with their comment
letters.
IV. Paperwork Reduction Act
Provisions of proposed Part 162 would result in new collection of
information requirements within the meaning of the Paperwork Reduction
Act of 1995 (``PRA''). The Commission therefore is submitting this
proposal to the Office of Management and Budget (``OMB'') for review in
accordance with 44 U.S.C. 3507(d) and 5 CFR 1320.11. The title for this
collection of information is ``Part 162--Protection of Consumer
Information Under the Fair Credit Reporting Act.'' If adopted,
responses to this new collection of information would be mandatory. The
Commission will protect proprietary information according to the
Freedom of
[[Page 66031]]
Information Act and 17 CFR part 145, ``Commission Records and
Information.'' In addition, section 8(a)(1) of the CEA strictly
prohibits the Commission, unless specifically authorized by the CEA,
from making public ``data and information that would separately
disclose the business transactions or market positions of any person
and trade secrets or names of customers.'' The Commission also is
required to protect certain information contained in a government
system of records according to the Privacy Act of 1974, 5 U.S.C. 552a.
1. Information Provided by Reporting Entities/Persons
Under proposed Part 162, reporting or recordkeeping CFTC
registrants, which presently would include approximately 3,172 persons
(including an estimate of the number of new CFTC registrants pursuant
to Title VII of the Dodd-Frank Act),\18\ would be required to collect
information and keep records for the purposes of providing opt-out
notices to consumers at a maximum of at least every five years. The
proposed collection for the affiliate marketing rules is estimated to
involve 0.01 burden hours per report or record. The estimated number of
opt-out notices per five-year period is 412,000. The estimated
aggregate number of burden hours each five-year period is 13,068.64
burden hours for the affiliate marketing rules.
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\18\ See the National Futures Association's (``NFA'') Internet
Web site at: http://www.nfa.futures.org/NFA-registration/NFA-
membership-and-dues.HTML for the most up-to-date number of CFTC
registrants. For the purposes of the PRA calculation, Commission
staff used the number of registered futures commission merchants,
commodity trading advisors, commodity pool operators and introducing
brokers on the NFA's Web site as of August 31, 2010.
Commission staff estimated the number of swap dealers and major
swap participants, which staff believes will register with the
Commission following the issuance of final rules under the Dodd-
Frank Act further defining the terms ``swap dealers'' and ``major
swap participants'' and setting forth a registration regime for
these entities. While staff believes that there may likely be
approximately 200 swap dealers, we have taken a conservative
approach in estimating that there will be 250 swap dealers for
Paperwork Reduction Act purposes.
Some of the entities that were registered as futures commission
merchants as of August 31, 2010 will soon register as retail foreign
exchange dealers. Consequently, the total number of CFTC registrants
will not be affected as a result of the change in registration from
future commission merchants to retail foreign exchange dealers.
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The same number of persons would be required to develop written
disposal plans only once. The proposed collection for the disposal
rules is estimated to involve between three to 10 burden hours per
plan, at an average of 3.5 burden hours, for an aggregate of 11,102
burden hours.
2. Information Collection Comments
The Commission invites the public and other Federal agencies to
comment on any aspect of the reporting and recordkeeping burdens
discussed above. Pursuant to 44 U.S.C. 3506(c)(2)(B), the Commission
solicits comments in order to: (i) Evaluate whether the proposed
collection of information is necessary for the proper performance of
the functions of the Commission, including whether the information will
have practical utility; (ii) evaluate the accuracy of the Commission's
estimate of the burden of the proposed collection of information; (iii)
determine whether there are ways to enhance the quality, utility, and
clarity of the information to be collected; and (iv) minimize the
burden of the collection of information on those who are to respond,
including through the use of automated collection techniques or other
forms of information technology.
Comments may be submitted directly to the Office of Information and
Regulatory Affairs, by fax at (202) 395-6566 or by e-mail at
[email protected]. Please provide the Commission with a copy
of submitted comments so that all comments can be summarized and
addressed in the final rule preamble. Refer to the ADDRESSES section of
this notice of proposed rulemaking for comment submission instructions
to the Commission. A copy of the supporting statements for the
collections of information discussed above may be obtained by visiting
RegInfo.gov. OMB is required to make a decision concerning the
collection of information between 30 and 60 days after publication of
this release. Consequently, a comment to OMB is most assured of being
fully effective if received by OMB (and the Commission) within 30 days
after publication of this notice of proposed rulemaking.
V. Regulatory Flexibility Act
The Regulatory Flexibility Act (``RFA'') \19\ requires that
agencies consider whether the regulations they propose will have a
significant economic impact on a substantial number of small entities
and, if so, provide a regulatory flexibility analysis respecting the
impact.\20\ The regulations proposed by the Commission shall affect
only futures commission merchants, introducing brokers, commodity
trading advisors, commodity pool operators, swap dealers and major swap
participants. The Commission has determined that the notice obligations
under this proposed regulation will not create a significant economic
impact on a substantial number of small entities. Moreover, the
Commission previously has determined that futures commission merchants
and commodity pool operators are not small entities for purposes of the
RFA.\21\ Accordingly, the Chairman, on behalf of the Commission, hereby
certifies pursuant to 5 U.S.C. 605(b) that the proposed rules, will not
have a significant impact on a substantial number of small entities.
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\19\ 5 U.S.C. 601 et seq.
\20\ 5 U.S.C. 601 et seq.
\21\ Previous determinations for FCMs at 47 FR 18618, 18619
(1982) and CPOs at 47 FR 18618, 18619 (1982).
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VI. Text of Proposed Rules
List of Subjects in 17 CFR Part 162
Consumer protection, Privacy.
For the reasons stated in the preamble, the Commodity Futures
Trading Commission proposes to add 17 CFR part 162 to read as follows:
PART 162--PROTECTION OF CONSUMER INFORMATION UNDER THE FAIR CREDIT
REPORTING ACT
Sec.
162.1 Purpose and scope.
162.2 Definitions.
Subpart A--Business Affiliate Marketing Rules
162.3 Affiliate marketing opt out and exceptions.
162.4 Scope and duration of opt out.
162.5 Contents of opt-out notice; consolidated and equivalent
notices.
162.6 Reasonable opportunity to opt out.
162.7 Reasonable and simple methods of opting out.
162.8 Delivery of opt-out notices
162.9 Renewal of opt out.
162.10-162.20 [Reserved]
Subpart B--Disposal Rules
162.21 Proper disposal of consumer information.
Authority: Sec. 1088, Pub. L. 111-203; 124 Stat. 1376 (2010).
Sec. 162.1 Purpose and scope.
(a) Purpose. The purpose of this part is to implement various
provisions in the Fair Credit Reporting Act, 15 U.S.C. 1681, et seq.
(``FCRA''), which provide certain protections to consumer information.
(b) Scope. This part applies to certain consumer information held
by the entities listed below. This part shall apply to futures
commission merchants, retail foreign exchange dealers, commodity
trading advisors, commodity pool operators, introducing brokers,
[[Page 66032]]
swap dealers and major swap participants, regardless of whether they
are required to register with the Commission. This part does not apply
to foreign futures commission merchants, foreign retail foreign
exchange dealers, commodity trading advisors, commodity pool operators,
introducing brokers, swap dealers and major swap participants unless
such entity registers with the Commission. Nothing in this part
modifies limits or supersedes the requirements set forth in Part 160 of
this title.
(c) Examples. The examples in this part are not exclusive.
Compliance with an example, to the extent applicable, constitutes
compliance with this part. Examples in a section illustrate only the
issue described in the section and do not illustrate any other issue
that may arise in this part.
Sec. 162.2 Definitions.
(a) Affiliate. The term ``affiliate'' of a means any company that
is under common ownership or common corporate control with a covered
affiliate.
(b) Clear and conspicuous. The term ``clear and conspicuous'' means
reasonably understandable and designed to call attention to the nature
and significance of the information presented in the notice.
(c) Common ownership or common corporate control. The term ``common
ownership or common corporate control'' means the power to exercise a
controlling influence over the management or policies of a company
whether through ownership of securities, by contract, or otherwise. Any
person who owns beneficially, either directly or through one or more
controlled companies, more than 25 percent of the voting securities of
any company is presumed to control the company. Any person who does not
own more than 25 percent of the voting securities of a company will be
presumed not to control the company.
(d) Company. The term ``company'' means any corporation, limited
liability company, business trust, general or limited partnership,
association, or similar organization.
(e) Concise.--
(1) In general. The term ``concise'' means a reasonably brief
expression or statement.
(2) Combination with other required disclosures. A notice required
by this part may be concise even if it is combined with other
disclosures required or authorized by Federal or state law.
(f) Consumer. The term ``consumer'' means an individual person.
(g) Consumer information. The term ``consumer information'' means
any record about an individual, whether in paper, electronic, or other
form, that is a consumer report or is derived from a consumer report.
Consumer information also means a compilation of such records. Consumer
information does not include information that does not identify
individuals, such as aggregate information or blind data.
(h) Covered affiliate. The term ``covered affiliate'' means a
futures commission merchant, retail foreign exchange dealer, commodity
trading advisor, commodity pool operator, introducing broker, swap
dealer or major swap participant, which is subject to the jurisdiction
of the Commission.
(i) Dispose or Disposal.--
(1) In general. The terms ``dispose'' or ``disposal'' means:
(i) The discarding or abandonment of consumer information; or
(ii) The sale, donation, or transfer of any medium, including
computer equipment, upon which consumer information is stored.
(2) Sale, donation, or transfer of consumer information. The sale,
donation, or transfer of consumer information is not considered
disposal for the purposes of subpart B.
(j) Dodd-Frank Act. The term ``Dodd-Frank Act'' means the Dodd-
Frank Wall Street Reform and Consumer Protection Act (Pub. L. 111-203,
124 Stat. 1376 (2010)).
(k) Eligibility information. The term ``eligibility information''
means any information that would be a consumer report if the exclusions
from the definition of ``consumer report'' in section 603(d)(2)(A) of
the FCRA did not apply. Examples of the type of information that would
fall within the definition of eligibility information includes an
affiliate's own transaction or experience information, such as
information about a consumer's account history with that affiliate, and
other information, such as information from credit bureau reports or
applications. Eligibility information does not include aggregate or
blind data that does not contain personal identifiers such as account
numbers, names, or addresses.
(l) FCRA. The term ``FCRA'' means the Fair Credit Reporting Act (15
U.S.C. 1681 et seq.).
(m) Financial product or service. The term ``financial product or
service'' means any product or service that a futures commission
merchant, retail foreign exchange dealer, commodity trading advisor,
commodity pool operator, introducing broker, major swap participant or
swap dealer could offer that is subject to the Commission's
jurisdiction.
(n) GLB Act. The term ``GLB Act'' means the Gramm-Leach-Bliley Act
(Pub. L. No. 106-102, 113 Stat. 1338 (1999)).
(o) Major swap participant. The term ``major swap participant'' has
the same meaning as in section 1a(33) of the Commodity Exchange Act, 7
U.S.C. 1 et seq., as may be further defined by this title, and includes
any person registered as such thereunder.
(p) Person. The term ``person'' means any individual, partnership,
corporation, trust, estate, cooperative, association, or other entity.
(q) Pre-existing business relationship. The term ``pre-existing
business relationship'' means a relationship between a person, or a
person's licensed agent, and a consumer based on--
(1) A financial contract between the person and the consumer which
is in force on the date on which the consumer is sent a solicitation by
this part;
(2) The purchase, rental, or lease by the consumer of a persons'
services or a financial transaction (including holding an active
account or policy in force or having another continuing relationship)
between the consumer and the person, during the 18-month period
immediately preceding the date on which the consumer is sent a
solicitation covered by this part; or
(3) An inquiry or application by the consumer regarding a financial
product or service offered by that person during the three-month period
immediately preceding the date on which the consumer is sent a
solicitation covered by this part.
(r) Solicitation--(1) In general. The term ``solicitation'' means
the marketing of a financial product or service initiated by an
affiliate to a particular consumer that is--
(i) Based on eligibility information communicated to that covered
affiliate by an affiliate that has or previously had the pre-existing
business relationship with a consumer as described in this part; and
(ii) Intended to encourage the consumer to purchase or obtain such
financial product or service.
A solicitation does not include marketing communications that are
directed at the general public.
(2) Examples. Examples of what communications constitute a
solicitation include communications such as a telemarketing
solicitation, direct mail, or e-mail, when those communications are
directed to a specific consumer based on eligibility information. A
solicitation does not
[[Page 66033]]
include communications that are directed at the general public without
regard to eligibility information, even if those communications are
intended to encourage consumers to purchase financial products and
services from the affiliate initiating the communications.
(s) Swap dealer. The term ``swap dealer'' has the same meaning as
in section 1a(49) of the Commodity Exchange Act, 7 U.S.C. 1 et seq., as
may be further defined by this title, and includes any person
registered as such thereunder.
Subpart A--Business Affiliate Marketing Rules
Sec. 162.3 Affiliate marketing opt out and exceptions.
(a) Initial notice and opt out. A covered affiliate may not use
eligibility information about a consumer that the covered affiliate
receives from an affiliate with the consumer to make a solicitation for
marketing purposes to such consumer unless--
(1) It is clearly and conspicuously disclosed to the consumer in
writing or if the consumer agrees, electronically, in a concise notice
that the person may use shared eligibility information about that
consumer received from an affiliate to make solicitations for marketing
purposes to such consumer;
(2) The consumer is provided a reasonable opportunity and a
reasonable and simple method to opt out, or prohibit the covered
affiliate from using eligibility information to make solicitations for
market purposes to the consumer; and
(3) The consumer has not opted out.
(b) Persons responsible for satisfying the notice requirement. The
notice required by this section must be provided:
(1) By an affiliate that has or previously had a pre-existing
business relationship with a consumer; or
(2) As part of a joint notice from two or more members of an
affiliated group of companies, provided that at least one of the
affiliates on the joint notice has or previously had a pre-existing
business relationship with the consumer.
(c) Exceptions. These proposed regulations would not apply to the
following covered affiliate:
(1) A covered affiliate that has a pre-existing business
relationship with a consumer;
(2) Communications between an employer and employee-consumer (or
his or her beneficiary) in connection with an employee benefit plan;
(3) A covered affiliate that is currently providing services to the
consumer;
(4) If the consumer initiated the communication with the covered
affiliate by oral, electronic, or written means;
(5) If the consumer authorized or requested the covered affiliate's
solicitation; or
(6) If compliance by a person with these regulations would prevent
that person's compliance with state insurance laws pertaining to unfair
discrimination.
(d) Making solicitations.
(1) When a solicitation occurs. A covered affiliate makes a
solicitation for marketing purposes if the person--
(i) Receives eligibility information from an affiliate;
(ii) Uses that eligibility information to do one or more of the
following:
(A) Identify the consumer or type of consumer to receive a
solicitation;
(B) Establish criteria used to select the consumer to receive a
solicitation about the covered affiliate's financial products or
services; or
(C) Decide which of the services or contracts to market to the
consumer or tailor the solicitation to that consumer; and
(iii) As a result of the covered affiliate's use of the eligibility
information, the consumer is provided a solicitation.
(2) Receipt of eligibility information. A covered affiliate may
receive eligibility information from an affiliate in various ways,
including when the affiliate places that information into a common
database that the covered affiliate may access.
(3) Service Providers. Except as provided in paragraph (d)(5) of
this section, a covered affiliate receives or uses an affiliate's
eligibility information if a service provider acting on the covered
affiliate's behalf (regardless of whether such service provider is a
third party or an affiliate of the covered affiliate) receives or uses
that information in the manner described in paragraph (d)(1)(i) or
(d)(1)(ii) of this section. All relevant facts and circumstances will
determine whether a service provider is acting on behalf of a covered
affiliate when it receives or uses an affiliate's eligibility
information in connection with marketing the covered affiliate's
financial products or services.
(4) Use by an affiliate of its own eligibility information. Unless
a covered affiliate uses eligibility information that the covered
affiliate receives from an affiliate in the manner described in
paragraph (d)(2) of this section, the covered affiliate does not make a
solicitation subject to this subpart:
(i) Uses its own eligibility information that it obtained in
connection with a pre-existing business relationship it has or
previously had with the consumer to market the covered affiliate's
financial products or services to the consumer; or
(ii) Directs its service provider to use the affiliate's own
eligibility information that it obtained in connection with a pre-
existing business relationship it has or previously had with the
consumer to market the covered affiliate's financial products or
services to the consumer, and the covered affiliate does not
communicate directly with the service provider regarding that use.
(5) Use of eligibility information by a service provider--(i) In
general. A covered affiliate does not make a solicitation subject to
this subpart if a service provider (including an affiliated or third-
party service provider that maintains or accesses a common database
that the covered affiliate may access) receives eligibility information
from an affiliate that has or previously had a pre-existing business
relationship with the consumer and uses that eligibility information to
market the covered affiliate's financial products or services to the
consumer, so long as--
(A) The affiliate controls access to and use of its eligibility
information by the service provider (including the right to establish
the specific terms and conditions under which the service provider may
use such information to market the covered affiliate's financial
products or services);
(B) The affiliate establishes specific terms and conditions under
which the service provider may access and use such affiliate's
eligibility information to market the covered affiliate's financial
products and services (or those of affiliates generally) to the
consumer, such as the identity of the affiliated companies whose
financial products or services may be marketed to the consumer by the
service provider, the types of financial products or services of
affiliated companies that may be marketed, and the number of times the
consumer may receive marketing materials, and periodically evaluates
the service provider's compliance with those terms and conditions;
(C) The affiliate requires the service provider to implement
reasonable policies and procedures designed to ensure that the service
provider uses such affiliate's eligibility information in accordance
with the terms and conditions established by such affiliate relating to
the marketing of the covered affiliate's financial products or
services;
(D) The affiliate is identified on or with the marketing materials
provided to the consumer; and
(E) The covered affiliate does not directly use its affiliate's
eligibility
[[Page 66034]]
information in the manner described in paragraph (b)(1)(ii) of this
section.
(ii) Writing requirements. (A) The requirements of paragraphs
(b)(5)(i)(A) and (C) of this section must be set forth in a written
agreement between the affiliate that has or previously had a pre-
existing business relationship with the consumer and the service
provider; and
(B) The specific terms and conditions established by the affiliate
as provided in paragraph (b)(5)(i)(B) of this section must be set forth
in writing.
(e) Relation to affiliate-sharing notice and opt out. Nothing in
this rulemaking will limit the responsibility of a covered affiliate to
comply with the notice and opt-out provisions under other privacy rules
under the FCRA, the GLB Act or the CEA.
Sec. 162.4 Scope and duration of opt out.
(a) Scope of opt-out election--(1) In general. The consumer's
election to opt out prohibits any covered affiliate subject to the
scope of the opt-out notice from using eligibility information received
from another affiliate to make solicitations to the consumer.
(2) Continuing relationship--(i) In general. If the consumer
establishes a continuing relationship with a covered affiliate or its
affiliate, an opt-out notice may apply to eligibility information
obtained in connection with--
(A) A single continuing relationship or multiple continuing
relationships that the consumer establishes with a covered affiliate or
its affiliates, including continuing relationships established
subsequent to delivery of the opt-out notice, so long as the notice
adequately describes the continuing relationships covered by the opt
out; or
(B) Any other transaction between the consumer and the covered
affiliate or its affiliates as described in the notice.
(ii) Examples of a continuing relationship. A consumer has a
continuing relationship with a covered affiliate or its affiliate if:
(A) The covered affiliate is a futures commission merchant through
whom a consumer has opened an account, or that carries the consumer's
account on a fully-disclosed basis, or that effects or engages in
commodity interest transactions with or for a consumer, even if the
covered affiliate does not hold any assets of the consumer;
(B) The covered affiliate is an introducing broker that solicits or
accepts specific orders for trades;
(C) The covered affiliate is a commodity trading advisor with whom
a consumer has a contract or subscription, either written or oral,
regardless of whether the advice is standardized, or is based on, or
tailored to, the commodity interest or cash market positions or other
circumstances or characteristics of the particular consumer;
(D) The covered affiliate is a commodity pool operator, and accepts
or receives from the consumer, funds, securities, or property for the
purpose of purchasing an interest in a commodity pool;
(E) The covered affiliate holds securities or other assets as
collateral for a loan made to the consumer, even if the covered
affiliate did not make the loan or do not affect any transactions on
behalf of the consumer; or
(F) The covered affiliate regularly effects or engages in commodity
interest transactions with or for a consumer even if the covered
affiliate does not hold any assets of the consumer.
(3) No continuing relationship--(i) In general. If there is no
continuing relationship between a consumer and the covered affiliate or
its affiliate, and the covered affiliate or its affiliate obtain
eligibility information about a consumer in connection with a
transaction with the consumer, such as an isolated transaction or a
credit application that is denied, an opt-out notice provided to the
consumer only applies to eligibility information obtained in connection
with that transaction.
(ii) Examples of no continuing relationship. A consumer does not
have a continuing relationship with a covered affiliate or its
affiliate if:
(A) The covered affiliate has acted solely as a ``finder'' for a
futures commission merchant, and the covered affiliate does not solicit
or accept specific orders for trades; or
(B) The covered affiliate has solicited the consumer to participate
in a pool or to direct his or her account and he or she has not
provided the covered affiliate with funds to participate in a pool or
entered into any agreement with the covered affiliate to direct his or
her account.
(4) Menu of alternatives. A consumer may be given the opportunity
to choose from a menu of alternatives when electing to prohibit
solicitations, such as by electing to prohibit solicitations from
certain types of affiliates covered by the opt-out notice but not other
types of affiliates covered by the notice, electing to prohibit
solicitations based on certain types of eligibility information but not
other types of eligibility information, or electing to prohibit
solicitations by certain methods of delivery but not other methods of
delivery. However, one of the alternatives must allow the consumer to
prohibit all solicitations from all of the affiliates that are covered
by the notice.
(5) Special rule for a notice following termination of all
continuing relationships. A consumer must be given a new opt-out notice
if, after all continuing relationships with the covered affiliate or
its affiliate(s) are terminated, the consumer subsequently establishes
another continuing relationship with the covered affiliate or its
affiliate(s) and the consumer's eligibility information is to be used
to make a solicitation. The new opt-out notice must apply, at a
minimum, to eligibility information obtained in connection with the new
continuing relationship. Consistent with paragraph b of this section,
the consumer's decision not to opt out after receiving the new opt-out
notice would not override a prior opt-out election by the consumer that
applies to eligibility information obtained in connection with a
terminated relationship, regardless of whether the new opt-out notice
applies to eligibility information obtained in connection with the
terminated relationship.
(b) Duration of opt-out election. An opt-out election must be
effective for a period of at least five years beginning when the
consumer's opt-out election is received and implemented, unless the
consumer subsequently revokes the opt-out election in writing or, if
the consumer agrees, electronically. An opt-out election may be
established for a period of more than five years or for an indefinite
period unless revoked.
(c) Time period in which a consumer can opt out. A consumer may opt
out at any time.
(d) No effect on opt-out period. An opt-out period may not be
shortened by sending a renewal notice to the consumer before expiration
of the opt-out period, even if the consumer does not renew the opt out.
Sec. 162.5 Contents of opt-out notice; consolidated and equivalent
notices.
(a) Contents of the opt-out notice-- (1) In general. An opt-out
notice must be in writing, be clear and conspicuous, as well as
concise, and must accurately disclose the following:
(i)(A) The name of the affiliate that has or previously had a pre-
existing business relationship with a consumer, which is providing the
notice; or
(B) If jointly provided jointly by multiple affiliates and each
affiliate shares a common name, then the notice may indicate that it is
being provided by multiple companies with the same name or multiple
companies in the same group or family of companies. If the affiliates
providing the notice do not share a common name, then the notice must
either separately identify each
[[Page 66035]]
affiliate by name or identify each of the common names used by those
affiliates;
(ii) The list of affiliates or types of affiliates whose use of
eligibility information is covered by the notice, which may include
companies that become affiliates after the notice is provided to the
consumer;
(iii) A general description of the types of eligibility information
that may be used to make solicitations to the consumer;
(iv) A statement that the consumer may elect to limit the use of
eligibility information to make solicitations to the consumer;
(v) A statement that the consumer's election will apply for the
specified period of time and, if applicable, that the consumer will be
allowed to renew the election once that period expires;
(vi) If the notice is provided to consumers who have previously
elected to opt out, that such consumer does not need to act again until
the consumer receives a renewal notice; and
(vii) A reasonable and simple method for the consumer to opt out.
(2) Specifying length of time period. If consumer is granted an
opt-out period longer than a five-year duration, the opt-out notice
must specify the length of the opt-out period.
(3) No revised notice for extension of opt-out period. The duration
of an opt-out period may be increased for a period longer than the
period specified in the opt-out notice without having to provide a
revised notice of the increase to the consumer.
(b) Joint relationships. (1) If two or more consumers jointly
obtain a financial product or service, a single opt-out notice may be
provided to joint consumers.
(2) Any of the joint consumers may exercise the right to opt out on
behalf of each joint consumer.
(3) The opt-out election notice must explain how an opt-out
election by a joint consumer will be treated. That is, the notice
should specify whether an opt-out election by a joint consumer will be
treated as applying to all of the associated joint consumers, or as
applying to each joint consumer separately.
(4) If the opt-out election notice provides that each joint
consumer is permitted to opt out separately, one of the joint consumers
must be permitted to opt out on behalf of all of the joint consumers
and the joint consumer must be permitted to exercise his or her
separate rights to opt out in a single response.
(5) A covered affiliate cannot require all joint consumers to opt
out before implementing any opt-out election.
(c) Alternative contents. If the consumer is afforded a broader
right to opt out of receiving marketing than is required by this
subpart, the requirements of this section may be satisfied by providing
the consumer with a clear, conspicuous, and concise notice that
accurately discloses the consumer's opt-out rights.
(d) Coordinated and consolidated consumer notices. A notice
required by this subpart may be coordinated and consolidated with any
other notice or disclosure required to be issued under any other
provision of law by the covered affiliate providing the notice,
including but not limited to notices in the FCRA or the GLB Act privacy
notices.
(e) Equivalent notices. A notice or disclosure that is equivalent
to the notice required by this part in terms of content, and that is
provided to a consumer together with a notice required by any other
provision of law, satisfies the requirements of this section.
(f) Model notices. Model notices are provided in Appendix A of this
part. These notices were meant to facilitate compliance with this
subpart; provided, however, that nothing herein shall be interpreted to
require persons subject to this part to use the model notices.
Sec. 162.6 Reasonable opportunity to opt out.
(a) In general. A covered affiliate must not use eligibility
information about a consumer that the covered affiliate receives from
an affiliate to make a solicitation to such consumer about the covered
affiliate's financial products or services, unless the consumer is
provided a reasonable opportunity to opt out, as required by this
subpart.
(b) Examples. A reasonable opportunity to opt out under this
subpart is:
(1) If the opt-out notice is mailed to the consumer, the consumer
has 30 days from the date the notice is mailed to opt out.
(2) If the opt-out notice is sent via electronic means to the
consumer, the consumer has 30 days from the date the consumer
acknowledges receipt to elect to opt out by any reasonable method.
(3) If the opt-out notice is sent via e-mail (where the consumer
has agreed to receive disclosures by e-mail), the consumer is given 30
days after the e-mail is sent to elect to opt out by any reasonable
method.
(4) If the opt-out notice provided to the consumer at the time of
an electronic transaction, the consumer is required to decide, as a
necessary part of proceeding with the transaction, whether to opt out
before completing the transaction.
(5) If the opt-out notice is provided during an in-person
transaction, the consumer is required to decide, as a necessary part of
completing the transaction, whether to opt out through a simple
process.
(6) If the opt-out notice is provided in conjunction with other
privacy notices required by law, the consumer is allowed to exercise
the opt-out election within a reasonable period of time and in the same
manner as the opt out under that privacy notice.
Sec. 162.7 Reasonable and simple methods of opting out.
(a) In general. A covered affiliate shall be prohibited from using
eligibility information about a consumer received from an affiliate to
make a solicitation to the consumer about the covered affiliate's
financial products or services, unless the consumer is provided a
reasonable and simple method to opt out, as required by this subpart.
(b) Examples. Reasonable and simple methods of opting out include:
(1) Designating a check-off box in a prominent position on an opt-
out election form;
(2) Including a reply form and a self-addressed envelope (in a
mailing);
(3) Providing an electronic means, if the consumer agrees, that can
be electronically mailed or processed through an Internet Web site;
(4) Providing a toll-free telephone number; or
(5) Exercising an opt-out election through whatever means are
acceptable under a consolidated privacy notice required under other
laws.
(c) Specific opt-out method. Each consumer may be required to opt
out through a specific method, as long as that method is acceptable
under this subpart.
Sec. 162.8 Acceptable delivery methods of opt-out notices.
(a) In general. The opt-out notice must be provided so that each
consumer can reasonably be expected to receive actual notice.
(b) Electronic notices. For opt-out notices provided
electronically, the notice may be provided in compliance with either
the electronic disclosure provisions in Sec. 1.4 of this title or the
provisions in section 101 of the Electronic Signatures in Global and
National Commerce Act, 15 U.S.C. 7001 et seq.
Sec. 162.9 Renewal of opt out.
(a) Renewal notice and opt-out requirement--(1) In general. Since
the
[[Page 66036]]
FCRA provides that opt-out elections can expire in a period of no less
than five years, an affiliate that has or previously had a pre-existing
business relationship with a consumer must provide a renewal notice to
the consumer after such time in order to allow its affiliates to make
solicitations. After the opt-out election period expires, its
affiliates may make solicitations unless:
(i) The consumer has been given a renewal notice that complies with
the requirements of this section and Secs. 162.6 through 162.8 of this
subpart, and a reasonable opportunity and a reasonable and simple
method to renew the opt-out election, and the consumer does not renew
the opt out; or
(ii) An exception in Sec. 162.3(c) of this subpart applies.
(2) Renewal period. Each opt-out renewal must be effective for a
period of at least five years as provided in Sec. 162.4(b) of this
subpart.
(3) Affiliates who may provide the renewal notice. The notice
required by this paragraph must be provided:
(i) By the affiliate that provided the previous opt-out notice, or
its successor; or
(ii) As part of a joint renewal notice from two or more members of
an affiliated group of companies, or their successors, that jointly
provided the previous opt-out notice.
(b) Contents of renewal or extension notice. The contents of the
renewal notice must include all of the same contents of the initial
notices, but also must include:
(1) A statement that the consumer previously elected to limit the
use of certain information to make solicitations to the consumer;
(2) A statement that the consumer may elect to renew the consumer's
previous election; and
(3) If applicable, a statement that the consumer's election to
renew will apply for a specified period of time stated in the notice
and that the consumer will be allowed to renew the election once that
period expires.
(c) Timing of renewal notice. Renewal notices must be provided in a
reasonable period of time before the expiration of the opt-out election
period or any time after the expiration of the opt-out period, but
before solicitations that would have been prohibited by the expired
opt-out election are made to the consumer.
(d) No effect on opt-out period. An opt-out period may not be
shortened by sending a renewal notice to the consumer before the
expiration of the opt-out period, even if the consumer does not renew
the opt-out election.
Sec. Sec. 162.10-162.20 [Reserved]
Subpart B--Disposal Rules
Sec. 162.21 Proper disposal of consumer information.
(a) In general. Any covered affiliate must adopt must adopt
reasonable, written policies and procedures that address
administrative, technical, and physical safeguards for the protection
of consumer information. These written policies and procedures must be
reasonably designed to:
(1) Insure the security and confidentiality of consumer
information;
(2) Protect against any anticipated threats or hazards to the
security or integrity of consumer information; and
(3) Protect against unauthorized access to or use of consumer
information that could result in substantial harm or inconvenience to
any consumer.
(b) Standard. Any covered affiliate under this part who maintains
or otherwise possesses consumer information for a business purpose must
properly dispose of such information by taking reasonable measures to
protect against unauthorized access to or use of the information in
connection with its disposal pursuant to a written disposal plan.
(c) Examples. The following examples are ``reasonable'' disposal
measures for the purposes of this subpart--
(i) Implementing and monitoring compliance with policies and
procedures that require the burning, pulverizing, or shredding of
papers containing consumer information so that the information cannot
practicably be read or reconstructed;
(ii) Implementing and monitoring compliance with policies and
procedures that require the destruction or erasure of electronic media
containing consumer information so that the information cannot
practically be read or reconstructed; and
(iii) After due diligence, entering into and monitoring compliance
with a written contract with another party engaged in the business of
record destruction to dispose of consumer information in a manner that
is consistent with this rule.
(d) Relation to other laws. Nothing in this section shall be
construed:
(1) To require a person to maintain or destroy any record
pertaining to a consumer that is imposed under Sec. 1.31 or any other
provision of law; or
(2) To alter or affect any requirement imposed under any other
provision of law to maintain or destroy such a record.
Appendix A to Part 162--Sample Clauses
A. Although use of the model forms is not required, use of the
model forms in this Appendix (as applicable) complies with the
requirement in section 624 of the FCRA for clear, conspicuous, and
concise notices.
B. Certain changes may be made to the language or format of the
model forms without losing the protection from liability afforded by
use of the model forms. These changes may not be so extensive as to
affect the substance, clarity, or meaningful sequence of the
language in the model forms. Persons making such extensive revisions
will lose the safe harbor that this Appendix provides. Acceptable
changes include, for example:
1. Rearranging the order of the references to ``your income'',
``your account history'', and ``your credit score''.
2. Substituting other types of information for ``income'',
``account history'', or ``credit score'' for accuracy, such as
``payment history'', ``credit history'', or ``claims history''.
3. Substituting a clearer and more accurate description of the
affiliates providing or covered by the notice for phrases such as
``the [ABC] group of companies,'' including without limitation a
statement that the entity providing the notice recently purchased
the consumer's account.
4. Substituting other types of affiliates covered by the notice
for ``commodity advisor'', ``futures clearing merchant'', or ``swap
dealer'' affiliates.
5. Omitting items that are not accurate or applicable. For
example, if a person does not limit the duration of the opt-out
period, the notice may omit information about the renewal notice.
6. Adding a statement informing consumers how much time they
have to opt out before shared eligibility information may be used to
make solicitations to them.
7. Adding a statement that the consumer may exercise the right
to opt out at any time.
8. Adding the following statement, if accurate: ``If you
previously opted out, you do not need to do so again.''
9. Providing a place on the form for the consumer to fill in
identifying information, such as his or her name and address.
A-1 Model Form for Initial Opt-out notice (Single-
Affiliate Notice)
A-2 Model Form for Initial Opt-out notice (Joint
Notice)
A-3 Model Form for Renewal Notice (Single-Affiliate
Notice)
A-4 Model Form for Renewal Notice (Joint Notice)
A-5 Model Form for Voluntary ``No Marketing'' Notice
A-1 Model Form for Initial Opt-Out Notice (Single-Affiliate Notice)
[Your Choice To Limit Marketing]/[Marketing Opt Out]
--[Name of Affiliate] is providing this notice.
--[Optional: Federal law gives you the right to limit some but not
all marketing from our affiliates. Federal law also requires us to
give you this notice to tell you about your choice to limit
marketing from our affiliates.]
[[Page 66037]]
--You may limit our affiliates in the [ABC] group of companies, such
as our [commodity advisor, futures clearing merchant, and swap
dealer] affiliates, from marketing their financial products or
services to you based on your personal information that we collect
and share with them. This information includes your [income], your
[account history with us], and your [credit score].
--Your choice to limit marketing offers from our affiliates will
apply [until you tell us to change your choice]/[for x years from
when you tell us your choice]/[for at least 5 years from when you
tell us your choice]. [Include if the opt-out period expires.] Once
that period expires, you will receive a renewal notice that will
allow you to continue to limit marketing offers from our affiliates
for [another x years]/[at least another 5 years].
--[Include, if applicable, in a subsequent notice, including an
annual notice, for consumers who may have previously opted out.] If
you have already made a choice to limit marketing offers from our
affiliates, you do not need to act again until you receive the
renewal notice.
To limit marketing offers, contact us [include all that apply]:
--By telephone: 1-877--
--On the Web: www._.com
--By mail: check the box and complete the form below, and send the
form to:
--[Company name]
--[Company address]
------ Do not allow your affiliates to use my personal information
to market to me.
A-2 Model Form for Initial Opt-out Notice (Joint Notice)
[Your Choice To Limit Marketing]/[Marketing Opt Out]
--The [ABC group of companies] is providing this notice.
--[Optional: Federal law gives you the right to limit some but not
all marketing from the [ABC] companies. Federal law also requires us
to give you this notice to tell you about your choice to limit
marketing from the [ABC] companies.]
--You may limit the [ABC companies], such as the [ABC commodity
advisor, futures clearing merchant, and swap dealer] affiliates,
from marketing their financial products or services to you based on
your personal information that they receive from other [ABC]
companies. This information includes your [income], your [account
history], and your [credit score].
--Your choice to limit marketing offers from the [ABC] companies
will apply [until you tell us to change your choice]/[for x years
from when you tell us your choice]/[for at least 5 years from when
you tell us your choice]. [Include if the opt-out period expires.]
Once that period expires, you will receive a renewal notice that
will allow you to continue to limit marketing offers from the [ABC]
companies for [another x years]/[at least another 5 years].
--[Include, if applicable, in a subsequent notice, including an
annual notice, for consumers who may have previously opted out.] If
you have already made a choice to limit marketing offers from the
[ABC] companies, you do not need to act again until you receive the
renewal notice.
To limit marketing offers, contact us [include all that apply]:
By telephone: 1-877--
On the Web: www._.com
By mail: check the box and complete the form below, and send the
form to:
[Company name]
[Company address]
------Do not allow any company [in the ABC group of companies] to
use my personal information to market to me.
A-3 Model Form for Renewal Notice (Single-Affiliate Notice)
[Renewing Your Choice To Limit Marketing]/[Renewing Your Marketing Opt
Out]
--[Name of Affiliate] is providing this notice.
--[Optional: Federal law gives you the right to limit some but not
all marketing from our affiliates. Federal law also requires us to
give you this notice to tell you about your choice to limit
marketing from our affiliates.]
--You previously chose to limit our affiliates in the [ABC] group of
companies, such as our [commodity advisor, futures clearing
merchant, and swap dealer] affiliates, from marketing their
financial products or services to you based on your personal
information that we share with them. This information includes your
[income], your [account history with us], and your [credit score].
--Your choice has expired or is about to expire.
To renew your choice to limit marketing for [x] more years,
contact us [include all that apply]:
By telephone: 1-877--
On the Web: www._.com
By mail: check the box and complete the form below, and send the
form to:
[Company name]
[Company address]
------Renew my choice to limit marketing for [x] more years.
A-4 Model Form for Renewal Notice (Joint Notice)
[Renewing Your Choice To Limit Marketing]/[Renewing Your Marketing Opt
Out]
--The [ABC group of companies] is providing this notice.
--[Optional: Federal law gives you the right to limit some but not
all marketing from the [ABC] companies. Federal law also requires us
to give you this notice to tell you about your choice to limit
marketing from the [ABC] companies.]
--You previously chose to limit the [ABC companies], such as the
[ABC commodity advisor, futures clearing merchant, and swap dealer]
affiliates, from marketing their financial products or services to
you based on your personal information that they receive from other
[ABC] companies. This information includes your [income], your
[account history], and your [credit score].
--Your choice has expired or is about to expire.
To renew your choice to limit marketing for [x] more years,
contact us [include all that apply]:
By telephone: 1-877--
On the web: www._.com
By mail: check the box and complete the form below, and send the
form to:
[Company name]
[Company address]
------Renew my choice to limit marketing for [x] more years.
A-5 Model Form for Voluntary ``No Marketing'' Notice
[Your Choice To Stop Marketing]
--[Name of Affiliate] is providing this notice. You may choose to
stop all marketing from us and our affiliates.
To stop all marketing offers, contact us [include all that
apply]:
By telephone: 1-877--
On the Web: www._.com
By mail: check the box and complete the form below, and send the
form to:
[Company name]
[Company address]
------Do not market to me.
By the Commission,
Dated: October 19, 2010.
David A. Stawick,
Secretary.
Statement of Chairman Gary Gensler
Business Affiliate Marketing and Disposal of Consumer Information Rules
October 19, 2010
I support today's Commission vote on the proposed rulemaking
providing privacy protections to nonpublic, consumer information
held by entities that are subject to the jurisdiction of the
Commission. The proposed rulemaking provides customers of
Commission-regulated entities with the same privacy protections now
enjoyed by the customers of entities regulated by other Federal
agencies.
The proposal includes two important rules. The first allows
customers to prohibit Commission-regulated entities from using
certain consumer information obtained from an affiliate to make
solicitations to that customer for marketing purposes. This will be
done by means of a customer opt out. The second rule requires
Commission-regulated entities to develop and implement a written
program and procedures for the proper disposal of consumer
information. I believe that these rules will help prevent the
unauthorized use and disclosure of nonpublic, consumer information.
[FR Doc. 2010-26893 Filed 10-26-10; 8:45 am]
BILLING CODE 6351-01-P
Last Updated: October 27, 2010