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: [email protected]

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.

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\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.

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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\

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\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.

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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\

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

Reduction Act analysis at 75 FR at 66030-31.

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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.

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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