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2011-17711

  • Federal Register, Volume 76 Issue 141 (Friday, July 22, 2011)[Federal Register Volume 76, Number 141 (Friday, July 22, 2011)]

    [Rules and Regulations]

    [Pages 43879-43890]

    From the Federal Register Online via the Government Printing Office [www.gpo.gov]

    [FR Doc No: 2011-17711]

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    COMMODITY FUTURES TRADING COMMISSION

    17 CFR Part 162

    RIN 3038-AD12

    Business Affiliate Marketing and Disposal of Consumer Information

    Rules

    AGENCY: Commodity Futures Trading Commission.

    ACTION: Final rule.

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    SUMMARY: The Commodity Futures Trading Commission is adopting

    regulations to implement new statutory provisions enacted by title X of

    the Dodd-Frank Wall Street Reform and Consumer Protection Act. These

    regulations apply to futures commission merchants, retail foreign

    exchange dealers, commodity trading advisors, commodity pool operators,

    introducing brokers, swap dealers and major swap participants. The

    Dodd-Frank Act provides the Commission with authority to implement

    regulations under sections 624 and 628 of the Fair Credit Reporting

    Act. The regulations implementing section 624 of the Fair Credit

    Reporting Act require CFTC-regulated entities to provide consumers with

    the opportunity to prohibit affiliates from using certain information

    to make marketing solicitations to consumers. The regulations

    implementing section 628 of the FCRA require CFTC-regulated entities

    that possess or maintain consumer report information in connection with

    their business activities to develop and implement written policies and

    procedures for the proper disposal of such information.

    DATES: Effective date: September 20, 2011.

    Compliance dates: Futures commission merchants, commodity pool

    operators, commodity trading advisors, introducing brokers, and retail

    foreign exchange dealers shall be in compliance with these rules not

    later than November 21, 2011. Swap dealers and major swap participants

    shall be in compliance with these rules not later than 60 days after

    the effective date of the final entities definition rulemaking, which

    the Commission will have published in the Federal Register at a future

    date.

    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: c_kennedy@cftc.gov.

    SUPPLEMENTARY INFORMATION:

    Table of Contents

    I. Background

    II. Rule Amendments

    A. Affiliate Marketing Rules

    B. Disposal Rules

    II. Cost-Benefit Analysis

    III. Paperwork Reduction Act

    IV. Regulatory Flexibility Act

    V. Text of Final Rules

    I. Background

    On October 27, 2010, the Commodity Futures Trading Commission

    (``Commission'' or ``CFTC'') proposed in the Federal Register the

    addition of a new part 162 to its Regulations (the ``Proposal'').\1\

    New part 162 was proposed to implement section 1088 of the Dodd-Frank

    Wall Street Reform and Consumer Protection Act \2\ (``Dodd-

    [[Page 43880]]

    Frank Act''), which sets out two amendments to the Fair Credit

    Reporting Act (``FCRA'') \3\ and the Fair and Accurate Credit

    Transactions Act of 2003 (``FACT Act'').\4\ As amended, the FCRA

    directs 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 of the Dodd-Frank Act 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 certain CFTC-regulated entities \5\ from using

    certain information obtained from an affiliate to make solicitations to

    that consumer (hereinafter referred in this preamble as the ``affiliate

    marketing rules''). Specifically, 17 CFR 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. This section and

    the affiliate marketing rule requirements are discussed in more detail

    below.

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    \1\ See 75 FR 66018, Oct. 27, 2010.

    \2\ See the Dodd-Frank Wall Street Reform and Consumer

    Protection Act, Public Law 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\ 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.

    \4\ 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.

    \5\ The CFTC-regulated entities that were covered in the

    Proposal included futures commission merchants (``FCMs''), retail

    foreign exchange dealers (``RFEDs''), commodity trading advisors

    (``CTAs''), commodity pool operators (``CPOs''), introducing brokers

    (``IBs''), swap dealers (``SDs''), or major swap participants

    (``MSPs''). Title VII of the Dodd-Frank Act created two new

    entities, which are subject to the jurisdiction of the Commission:

    SDs and MSPs. Section 162.2(n) of the Commission's regulations, 17

    CFR 162.2(n), defines the term ``major swap participant'' to have

    the same meaning as in section 1a(33) of the Commodity Exchange Act,

    7 U.S.C. 1 et seq. (``CEA''), as may be further defined by the

    Commission's regulations, and includes any person registered as such

    thereunder. Section 162.2(r) of the Commission's regulations, 17 CFR

    162.2(r), defines the term ``swap dealer'' to have the same meaning

    as in section 1a(49) of the CEA, as may be further defined by the

    Commission's regulations, and includes any person registered as such

    thereunder.

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    The other provision in section 1088 of the Dodd-Frank 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 in this preamble as the ``disposal rules'').

    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.\6\ The Commission, after consulting with many of the

    Agencies, is acting now pursuant to the Dodd-Frank Act to finalize and

    implement the affiliate marketing rules and disposal rules.

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    \6\ 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 60-day public comment period on the Proposal expired on

    December 27, 2010.\7\ In response to the Proposal, the Commission

    received a total of four comment letters.\8\ Two of the four addressed

    the merits or substance of the Proposal.\9\ Specifically, these

    comments addressed the following issues: (1) Consistency with the other

    Agencies' final regulations; (2) minor changes to the ``consumer''

    definition; (3) correction of minor typographical errors; (4) the

    compliance date of the rules; and (5) consideration of additional

    burdens that Commission did not address in the Proposal's Paperwork

    Reduction Act and cost-benefit analyses.\10\

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    \7\ See 75 FR at 66019.

    \8\ Copies of these comment letters are available on the

    Commission's Web site at http://www.cftc.gov.

    \9\ The Securities Industry and Financial Markets Association

    (``SIFMA'') submitted a comment letter dated December 20, 2010 (the

    ``SIFMA letter''). The International Swaps and Derivatives

    Association (``ISDA'') and the Financial Services Roundtable

    (``FSR'') jointly submitted a comment letter dated December 27, 2010

    (the ``ISDA/FSR letter''). As noted above, both letters are

    available on the Commission's Web site.

    \10\ The Commission also has made a few technical revisions to

    its final rules to add clarity. For example, in Sec.

    162.4(a)(2)(ii), the Commission revised two of the examples of what

    constitutes a continuing relationship with a covered affiliate.

    Specifically, the Commission revised these examples to demonstrate

    instances where an SD or MSP may have such a relationship, and where

    a swap transaction may evidence such a relationship.

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    II. Rule Amendments

    A. Affiliate Marketing Rules

    Section 624 of the FCRA generally provides that a consumer can

    block certain CFTC-regulated entities from soliciting the consumer \11\

    based on eligibility information \12\ that such registrant received

    from an affiliate \13\ that has or previously had a pre-existing

    business relationship \14\ with that

    [[Page 43881]]

    consumer. To implement section 624 of the FCRA, Sec. 162.3(a)

    establishes three conditions that must be met before a covered

    affiliate \15\ that does not have a pre-existing business relationship

    with a consumer may use eligibility information to make a solicitation

    \16\ to that consumer.\17\ First, the rule provides that a notice must

    be clearly and conspicuously \18\ disclosed to the consumer in writing

    or, if the consumer agrees, electronically, in a concise \19\ 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.\20\ 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.\21\ Third, the consumer must not have

    opted out.

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    \11\ Proposed Sec. 162.2(f) defined the term ``consumer'' to

    mean an individual person. This definition follows the statutory

    definition in section 603(c) of the FCRA. As was noted in the

    preamble to the Proposal, an individual acting through a legal

    representative qualifies as a consumer. The Commission is amending

    the definition in the final rule as described herein to address

    comments received in response to the Proposal.

    \12\ See 17 CFR 162.2(k), which defines the term ``eligibility

    information'' to mean 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 person, and other information, such as

    information from credit bureau reports or applications. 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.

    \13\ See 17 CFR 162.2(a), which defines ``affiliates'' to mean

    ``any person that is related by common ownership or common corporate

    control with a covered affiliate.''

    \14\ See 17 CFR 162.2(q), which defines the term ``pre-existing

    business relationship'' 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.

    \15\ See 17 CFR 162.2(h), which defines the term ``covered

    affiliate'' to mean an FCM, RFED, CTA, CPO, IB, SD, or MSP, which is

    subject to the jurisdiction of the Commission.

    \16\ See 17 CFR 162.2(r), which 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 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

    financial products and services from the person initiating the

    communications.

    \17\ Section 162.3(d) of the Commission's regulations sets forth

    when a covered affiliate makes a solicitation to a consumer.

    \18\ See 17 CFR 162.2(b), which 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.

    \19\ See 17 CFR 162.2(h), which defines the term ``concise'' to

    mean a reasonably brief expression or statement.

    \20\ Section 162.3(b) of the Commission's regulations, 17 CFR

    162.3(b), identifies the parties who are responsible to provide the

    notice as 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.

    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.

    \21\ Section 162.6(a) of the Commission's regulations, 17 CFR

    162.6(a), sets forth the general rule prohibiting covered affiliates

    from using eligibility information about a consumer unless the

    consumer is provided a reasonable opportunity to opt out, as

    required by the proposed regulation. Section 162.7(b) sets forth

    reasonable and simple methods of opting out.

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    As noted above, the Commission received specific comments regarding

    the definition of certain terms. In particular, the Securities Industry

    Financial Markets Association (``SIFMA'') suggested that the Commission

    amend the proposed definition of the term ``affiliate'' in order to

    make it conform to the Agencies' rules.\22\ In the Proposal, the

    Commission defined ``affiliate'' as ``any company that is under common

    ownership or common corporate control.'' SIFMA suggested that the

    Commission change this definition by using the words ``related by''

    rather than ``under.'' The Commission agrees that this change will

    further the goal of consistency with other Agencies' rules and has

    adopted this suggestion in its final rules.

    ---------------------------------------------------------------------------

    \22\ See the SIFMA letter at 3.

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    In addition, SIFMA and, in a joint letter, the International Swaps

    and Derivatives Association (``ISDA'') and the Financial Services

    Roundtable (``FSR'') encouraged the Commission to revise the

    ``consumer'' definition to indicate that individuals who provide

    identifiable information for non-consumer purposes are not

    ``consumers.'' \23\ Specifically, these commenters contend that the

    proposed definition is over-inclusive and as a result would include

    individuals such as market makers, individual floor brokers, locals,

    and others whose individually identifiable information may be collected

    in furtherance of market-related transactions for non-consumer

    purposes. These commenters recommend that the Commission employ a

    definition similar to that in title V of the Gramm-Leach-Bliley

    Act.\24\ The Commission agrees that including such individuals could

    possibly be overreaching the intent of the FCRA, and has added a

    qualifying statement to the consumer definition which excludes from

    that definition persons who are ``market makers, floor brokers, locals,

    or individual persons whose information is not collected to determine

    eligibility for personal, family, or household purposes.''

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    \23\ See the SIFMA letter at 4 and the ISDA/FSR letter at 2.

    \24\ See 15 U.S.C. 6809(9).

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    With respect to several of the examples that the Commission set out

    in the Proposal's preamble and rule text for the affiliate marketing

    rules, SIFMA noted that the Commission's usage of examples in the

    Proposal were inconsistent with the usage of examples by other Agencies

    in their final rules.\25\ In particular, SIFMA pointed out that, unlike

    the other Agencies' rules, the Proposal does not contain examples of

    ``solicitation,'' and does contain examples of ``eligibility

    information.'' SIFMA suggested that, to ``maximize [the final rules']

    benefit and promote consistency,'' the Commission revise the affiliate

    marketing rules to follow the Agencies' usage of examples in their

    final affiliate marketing rules. That is, when the Agencies have

    included examples in the text of the rules, the Commission should

    incorporate examples into its final rules, and vice versa. In addition,

    SIFMA asked the Commission to indicate that the examples are merely

    illustrative of acceptable practices and are not prescriptive. Lastly,

    SIFMA asked the Commission to make clear that examples and practices

    developed in connection with the analogues rules of the Agencies should

    be considered as potential guidance for the Commission's rule.

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    \25\ See the SIFMA letter at 5.

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    Despite SIFMA's comments, the Commission does not believe that the

    inclusion or exclusion of examples warrants an interpretation of the

    Commission's final affiliate marketing rules that is different than the

    interpretation of the Agencies' final affiliate marketing rules. The

    Commission has chosen a slightly different approach than the Agencies

    in terms of its usage of examples. This approach should not be read to

    suggest that the Commission intended a different interpretation of its

    rules. Indeed, the Commission has included examples where it believes

    they will be illustrative, and does not believe that these examples

    should be read as prescriptive. Lastly, the Commission has decided not

    to include a statement to the effect that the examples in the Agencies'

    rules should be considered as guidance with respect to the Commission's

    rule. The Agencies' examples are directed at their registrants; the

    Commission's examples are directed at its registrants. Again, these

    differences should not be interpreted to suggest that the Commission's

    rule is different.

    SIFMA also pointed out two typographical errors which the

    Commission has corrected in the final

    [[Page 43882]]

    rules.\26\ These corrections were (1) changing the word ``market'' to

    ``marketing'' in Sec. 162.3(a)(2); and (2) changing the word

    ``includes'' to ``include'' in Sec. 162.2(k).

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    \26\ See the SIFMA letter at 4-5.

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    B. Disposal Rules

    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

    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 Commission's

    disposal rules \27\ apply to certain Commission-regulated entities \28\

    that, for a business purpose, maintain or otherwise possess such

    consumer information.\29\

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    \27\ See 17 CFR 162.2(i), which 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 Proposal noted that the sale, donation, or transfer, as

    opposed to the discarding or abandonment, of consumer information

    would not be considered ``disposal'' under this definition. For

    example, an entity subject to the disposal rule that transfers

    consumer report information to a third party for marketing purposes

    would not be discarding the information for the purposes of the

    disposal rule. If the entity sells computer equipment on which

    consumer report information is stored, however, the sale would be

    considered disposal. This definition is wholly consistent with the

    definition of ``dispose'' or ``disposal'' in the Agencies' final

    disposal rules. For those reasons, the Commission adopts this

    definition as proposed.

    \28\ Like the affiliate marketing rules, the types of

    Commission-regulated entities that are subject to the disposal rules

    are FCMs, RFEDs, CTAs, CPOs, IBs, SDs, and MSPs.

    \29\ See 17 CFR 162.2(g), which 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 (as defined section 603(d)(1) of the

    FCRA). 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.

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    The general disposal requirement in Sec. 162.21(a), 17 CFR 162.21,

    provides that Commission-regulated entities adopt reasonable, written

    policies and procedures that address the administrative, technical, and

    physical safeguards for the protection of consumer information.

    A commenter suggested that the Commission remove language from the

    text of the Proposal, which requires disposal to take place ``pursuant

    to a written disposal plan.'' The commenter suggested that such

    language would be duplicative and possibly confusing because the

    Proposal already required ``written policies and procedures'' for

    disposal. The commenter suggested that the removal of this language

    would further the conformity of this rule with the other Agencies'

    rules. The Commission agrees and has removed the requirement that

    disposal take place ``pursuant to a written disposal plan'' from the

    final rule text.

    The standard for disposal is flexible to allow these entities 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.

    C. Compliance Dates

    In the Proposal, the Commission proposed to adopt part 162 on July

    21, which was intended to coincide with the proposed effective date of

    the Commission's amendments to part 160 of its regulations.\30\ SIFMA

    requested that the Commission extend the effective date of the disposal

    and affiliate marketing rules from July 21, 2011 to nine months after

    the date of publication.\31\ SIFMA argued that this would allow the

    covered entities enough time to come into compliance with the rules.

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    \30\ See 75 FR 66014, Oct. 27, 2010. The effective date of the

    part 160 conforming amendments rulemaking was intended to follow the

    designated transfer date when various Federal agencies transfer

    their consumer protection authority to the Consumer Financial

    Protection Bureau pursuant to section 1100H of the Dodd-Frank Act.

    \31\ See the SIFMA letter at 6.

    ---------------------------------------------------------------------------

    The Commission partly agrees with SIFMA's comment with respect to

    the new entities (i.e., SDs and MSPs) that must comply with the final

    rules. The effective date of the final rules will be 60 days from the

    date of publication in the Federal Register. However, with respect to

    FCMs, IBs, CTAs, CPOs, and RFEDs, the Commission has decided to

    establish a compliance date of 120 days after the date of publication

    in the Federal Register. In making its decision, the Commission

    considered the amount of time that the other Agencies' final rules gave

    to affected entities in order to comply with their respective rules.

    These Agencies gave their affected entities 120 months to comply with

    the provision of their respective rules. In addition, the Commission

    considered the fact that many of its regulated entities are currently

    required to adhere to the FTC's disposal and affiliate marketing rules

    which are substantially identical.

    With respect to SDs and MSPs, the Commission has determined that

    these new entities shall have 60 days after the date of publication in

    the Federal Register of the final entities definitional rulemaking \32\

    to come into compliance with these rules. The Commission expects to

    approve and publish in the Federal Register the final entities

    definitional rulemaking at a date in the future.

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    \32\ See the Commission's proposed entities definitional

    rulemaking at 75 FR 80174, Dec. 21, 2010.

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    II. Cost-Benefit Considerations.

    Section 15(a) of the CEA explicitly requires the Commission to

    consider the costs and benefits of its actions before issuing a rule or

    order under the CEA. By its terms, section 15(a) neither requires the

    Commission to quantify the costs and benefits of amendments to

    regulations, nor does it require the Commission to determine whether

    the benefits of the amendments outweigh its costs. Section 15(a)

    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

    amendment 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.

    Section 1088 of the Dodd-Frank Act provides the Commission with

    authority to implement rules under sections 624 and 628 of the FCRA. In

    its Proposal, the Commission prescribed rules implementing section 624

    of the FCRA, which requires certain Commission-regulated entities to

    provide consumers with the opportunity to prohibit affiliates from

    using certain information to make marketing solicitations to consumers.

    The Commission also prescribed rules implementing section 628 of the

    FCRA, which requires certain Commission-regulated entities that possess

    or maintain consumer report information in connection with their

    business activities to develop and implement written policies and

    procedures for the proper disposal of such information. These proposed

    regulations would require CFTC registrants to do two things with

    respect to certain consumer information. The Commission proposed to (1)

    create a new part 162 of its regulations to include both the business

    affiliate rules

    [[Page 43883]]

    and the disposal rules and (2) require that this new part apply to the

    following Commission-regulated entities: FCMs; IBs; CTAs; CPOs; RFEDs;

    SDs; and MSPs.

    The cost-benefit discussion in the Proposal analyzed the costs and

    benefits of imposing new part 162 on these entities, most of which

    currently comply with substantially identical regulations imposed by

    the Agencies. With respect to costs, the Commission's Proposal stated

    that the costs to aforementioned entities 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's Proposal also set out the following potential

    costs to the general public: (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, there would be an increased

    chance 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's Proposal stated

    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's

    Proposal stated that, as a result of the implementation of the disposal

    rules, the potential for the misuse of consumer information will

    greatly decrease.

    In issuing final rules, the Commission has considered the costs and

    benefits referenced above in light of the comments received in response

    to its Proposal and the specific areas of concern identified in section

    15(a). An analysis of the section 15(a) factors is set out immediately

    below, followed by a discussion of the comments received in response to

    the Commission's cost-benefit discussion in its Proposal.

    1. Protection of market participants and the public. The Commission

    believes that requiring certain Commission-regulated entities to

    provide opt-out notices and to protect customer information through

    disposal of such information will greatly benefit the general public by

    protecting the privacy of the public's personal information. Similarly,

    the Commission believes that requiring Commission-regulated entities to

    ensure the protection of nonpublic personal information will reduce the

    litigation risk that these entities face related to privacy causes of

    action. The Commission further believes that the costs, which will be

    placed on its regulated entities, will be equal to or no greater than

    those costs that the Agencies currently impose on most of these

    entities under the Agencies' similar regulations.\33\

    ---------------------------------------------------------------------------

    \33\ The Commission acknowledges that there will likely be an

    incremental cost in the aggregate in respect of those entities who

    do not currently comply with the Agencies' similar regulations. The

    Commission believes that this incremental cost, however, is

    outweighed by the benefits that will accrue to the general public in

    terms of the privacy protections that will be afforded to their

    personal information.

    ---------------------------------------------------------------------------

    2. Efficiency and competition. The Commission believes that the

    requirements to provide opt-out notices will benefit efficiency by

    reducing the number of solicitations sent to customers. The

    Commission's final rules also will benefit efficiency and competition

    by providing Commission-regulated entities with flexibility in terms of

    how best to distribute opt-out notices and to adopt disposal policies

    and procedures to protect customer information. Ultimately, this

    flexibility will allow these entities to develop procedures that are

    best suited to each entity's business and needs. As noted above, the

    Commission believes that the costs, which will be placed on these

    entities will be equal to or no greater than those costs currently

    placed on them under the Agencies' similar regulations.

    3. Price discovery and financial integrity of futures and swaps

    markets, price discovery and sound risk management practices. The final

    rules should have no effect, from the standpoint of imposing costs or

    creating benefits, on the price discovery function or financial

    integrity of the futures and swaps markets or on the risk management

    practices of the Commission-regulated entities.

    4. Other public interest considerations. As noted above, part 162

    will provide these entities with maximum flexibility in designing their

    own compliance systems in a manner consistent with the legal

    requirements under the affiliate marketing rules and disposal rules.

    Ultimately, the Commission believes that requiring its entities to

    comply with the final affiliate marketing rules and disposal rules will

    harmonize privacy protections for individual customers across all

    financial markets regardless of whether those entities are regulated by

    the Commission or the other Agencies.

    5. Response to Comments. In its Proposal, the Commission solicited

    comment on its consideration of these costs and benefits. The

    Commission received one comment with respect to the cost and benefits

    analysis in its Proposal. Specifically, SIFMA argued that the

    Commission also should consider anticipated additional costs associated

    with monitoring the privacy and opt-out notice process, addressing

    consumer issues, and adjusting records to comport with consumer

    requests. SIFMA did not provide specific cost information related to

    these additional activities. Notwithstanding SIFMA's assertion, the

    Commission notes that the additional activities and costs raised by

    SIFMA were subsumed within the considerations discussed in the

    Proposal.\34\

    ---------------------------------------------------------------------------

    \34\ See the Commission's cost-benefit discussion and Paperwork

    Reduction Act analysis at 75 FR at 66030-31.

    ---------------------------------------------------------------------------

    In line with Section 15(a) of the CEA, the Commission believes that

    prescribing final rules is in the public interest and will further

    protect market the general public, promote efficiency and competition,

    and address other public interest considerations such as the

    harmonization of regulation across financial markets, regardless of

    which Federal regulator oversees a financial entity. In the

    Commission's view, these benefits far outweigh the additional costs

    that SIFMA cited.

    III. Paperwork Reduction Act

    Under the Paperwork Reduction Act of 1995 (``PRA''), 44 U.S.C. 3501

    et seq., an agency may not conduct or sponsor, and a person is not

    required to respond to, a collection of information unless it displays

    a currently valid control

    [[Page 43884]]

    number. The Commission's final rule regarding the protection of

    consumer information under the Fair Credit Reporting Act results in

    information collection requirements within the meaning of the PRA. The

    Commission submitted the proposing release along with supporting

    documentation 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

    Commission requested that OMB approve and assign a new control number

    for the collection of information required by the proposing release.

    In response to the Commission's request in the proposing release

    for comments on any potential paperwork burden associated with both the

    proposed affiliate marketing and disposal rules, only SIFMA provided

    substantive comments addressing the merits of the Commission's proposed

    PRA calculations.\35\ In particular, SIFMA proposed that the burden

    estimate for the affiliate marketing rules should be refined to account

    for burden hours associated with: (i) Monitoring the opt-out notice

    process; (ii) addressing consumer questions and concerns about opt-out

    notices; and (iii) adjusting records where a consumer changes his or

    her mind about his or her election to opt-in or out. In addition, SIFMA

    proposed that the burden estimate for the disposal rules should be

    refined to: (i) Revise disposal plans to account for use of new

    technology, new business processes, etc.; and (ii) conduct regular

    reviews of its disposal plan to determine when revisions are necessary

    or advisable.

    ---------------------------------------------------------------------------

    \35\ See the SIFMA letter at 4-5.

    ---------------------------------------------------------------------------

    Based on these comments, the Commission estimates that 3,172

    covered entities may incur an additional 3.5 burden hours when

    complying with the affiliate marketing rules, for an aggregate of

    11,102 annual burden hours. These additional burden hours are

    attributable to monitoring the opt-out notice process, addressing

    consumer questions and concerns about opt-out notices, and adjusting

    customer records.

    In addition, the Commission estimates that 3,172 covered entities

    may incur an additional 2.4 burden hours when complying with the

    disposal rules, for an aggregate of 7,612.8 annual burden hours. These

    additional burden hours are attributable to revise and update disposal

    plans on an ongoing basis, and conduct regular reviews of its disposal

    plan as necessary or advisable. Accordingly, the Commission has

    submitted to the OMB an amended calculation of the annual burden hours

    for the final affiliate marketing and disposal rules.

    IV. Regulatory Flexibility Act

    The Regulatory Flexibility Act (``RFA'') \36\ requires that Federal

    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.\37\ The Commission's final regulations will affect only FCMs,

    IBs, CTAs, CPOs, SDs, and MSPs.

    ---------------------------------------------------------------------------

    \36\ 5 U.S.C. 601 et seq.

    \37\ 5 U.S.C. 601 et seq.

    ---------------------------------------------------------------------------

    The regulations implementing section 624 of the FCRA require above-

    referenced CFTC-regulated entities to provide consumers with the

    opportunity to prohibit affiliates from using certain information to

    make marketing solicitations to consumers. The regulations implementing

    section 628 of the FCRA require the above-referenced CFTC-regulated

    entities 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. The

    Commission certified in the Proposal that these rules will not have a

    significant economic impact on a substantial number of small entities.

    The Commission did not receive any substantive comments to its RFA

    analysis in relation to the Proposal. Moreover, the Commission

    previously determined that FCMs, CPOs, and IBs are not small entities

    for purposes of the RFA.\38\ Therefore, nothing alters the Commission's

    determination in the Proposal that the obligations created by these

    rules will not create a significant economic impact on a substantial

    number of small entities.

    ---------------------------------------------------------------------------

    \38\ Previous determinations for FCMs at 47 FR 18618, 18619,

    Apr. 30, 1982; CPOs at 47 FR 18618, 18619, Apr. 30, 1982; and IBs at

    48 FR 14933, 14955, Apr. 6, 1983.

    ---------------------------------------------------------------------------

    V. Text of Final Rules

    List of Subjects in 17 CFR Part 162

    Brokers, Dealers, Consumer protection, Privacy, Reporting and

    recordkeeping.

    For the reasons stated in the preamble, the Commodity Futures

    Trading Commission adds 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 Acceptable 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.

    Appendix A to Part 162--Sample Clauses

    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, major

    swap participants and swap dealers, 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, major swap participants and swap dealers 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'' for the purposes of this part

    means any person that is related by 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.

    [[Page 43885]]

    (c) Common ownership or common corporate control. The term ``common

    ownership or common corporate control'' for the purposes of this part

    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. Except as otherwise provided, the term ``consumer''

    means an individual person. The term consumer does not include market

    makers, floor brokers, locals, or individual persons whose information

    is not collected to determine eligibility for personal, family, or

    household purposes.

    (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

    (as defined in section 603(d)(2) of the FCRA). 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, major

    swap participant or swap dealer, 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 include 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. 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

    solicitations 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 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

    [[Page 43886]]

    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

    marketing 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 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

    [[Page 43887]]

    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 is a major swap participant that 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 is a swap dealer that regularly effects

    or engages in swap 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 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

    [[Page 43888]]

    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 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 Sec. Sec. 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.

    [[Page 43889]]

    (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.

    (c) Examples. The following examples are ``reasonable'' disposal

    measures for the purposes of this subpart--

    (1) 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;

    (2) 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

    (3) 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.]

    --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.

    [[Page 43890]]

    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.

    Issued in Washington, DC, on July 7, 2011 by the Commission.

    David A. Stawick,

    Secretary of the Commission.

    Appendices to Business Affiliate Marketing and Disposal of Consumer

    Information Rules--Commission Voting Summary and Statements of

    Commissioners

    Note: The following appendices will not appear in the Code of

    Federal Regulations.

    Appendix 1--Commission Voting Summary

    On this matter, Chairman Gensler and Commissioners Dunn,

    Sommers, O'Malia and Chilton voted in the affirmative; no

    Commissioner voted in the negative.

    Appendix 2--Statement of Chairman Gary Gensler

    I support the final rulemaking to extend to customers of CFTC-

    regulated entities protections preventing certain business

    affiliated marketing and establishing other consumer information

    protections under the Fair Credit Reporting Act (FCRA). The

    rulemaking protects consumers by providing privacy protections to

    nonpublic consumer information held by entities that are subject to

    the jurisdiction of the Commission. The final rulemaking provides

    customers of CFTC-regulated entities with the same privacy

    protections now enjoyed by the customers of entities regulated by

    other Federal agencies.

    The rulemaking has two important features. First, it 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. Second, it requires Commission-

    regulated entities to develop and implement a written program and

    procedures for the proper disposal of consumer information. The

    rulemaking will help prevent the unauthorized use and disclosure of

    nonpublic, consumer information.

    [FR Doc. 2011-17711 Filed 7-21-11; 8:45 am]

    BILLING CODE 6351-01-P

    Last Updated: July 22, 2011



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