2010-26893

FR Doc 2010-26893[Federal Register: October 27, 2010 (Volume 75, Number 207)]

[Proposed Rules]

[Page 66018-66037]

From the Federal Register Online via GPO Access [wais.access.gpo.gov]

[DOCID:fr27oc10-17]

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COMMODITY FUTURES TRADING COMMISSION

17 CFR Part 162

RIN Number 3038-AD12

Business Affiliate Marketing and Disposal of Consumer Information

Rules

AGENCY: Commodity Futures Trading Commission.

ACTION: Notice of proposed rulemaking.

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SUMMARY: The Commodity Futures Trading Commission (``Commission'' or

``CFTC'') is proposing regulations to implement new statutory

provisions enacted by Title X of the ``Dodd-Frank Wall Street Reform

and Consumer Protection Act'' (``Dodd-Frank Act''). These proposed

regulations apply to futures commission merchants, retail foreign

exchange dealers, commodity trading advisors, commodity pool operators,

introducing brokers, swap dealers and major swap participants

(collectively, ``CFTC registrants''). The Dodd-Frank Act provides the

CFTC with authority to implement regulations under sections 624 and 628

of the Fair Credit Reporting Act (``FCRA''). The proposed regulations

implementing section 624 of the FCRA require CFTC registrants to

provide consumers with the opportunity to prohibit affiliates from

using certain information to make marketing solicitations to consumers.

The proposed regulations implementing section 628 of the FCRA require

CFTC registrants that possess or maintain consumer report information

in connection with their business activities

[[Page 66019]]

to develop and implement a written program for the proper disposal of

such information.

DATES: Comments must be received on or before December 27, 2010.

ADDRESSES: You may submit comments, identified by RIN number 3038-AD12,

by any of the following methods:

Federal eRulemaking Portal: http://www.regulations.gov.

Follow the instructions for submitting comments.

Regular Mail: David Stawick, Secretary, Commodity Futures

Trading Commission, Three Lafayette Centre, 1155 21st Street, NW.,

Washington, DC 20581.

E-mail: [email protected]

Hand Delivery/Courier: Same as mail above.

All comments must be submitted in English, or if not, accompanied

by an English translation. Comments will be posted as received at

http://www.cftc.gov. You should submit information only that you wish

to make available publicly. If you wish the Commission to consider

information that is exempt from disclosure under the Freedom of

Information Act, a petition for confidential treatment of the exempt

information may be submitted according to the established rules in CFTC

Regulation 145.9.\1\

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\1\ 17 CFR 145.9.

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The Commission reserves the right, but shall have no obligation, to

review, pre-screen, filter, redact, refuse or remove any or all of your

submission from http://www.cftc.gov that it may deem to be

inappropriate for publication, such as obscene language. All

submissions that have been redacted or removed that contain comments on

the merits of the rulemaking will be retained in the public comment

file and will be considered as required under the Administrative

Procedure Act, 5 U.S.C. 551 et seq., and other applicable laws, and may

be accessible under the Freedom of Information Act, 5 U.S.C. 552.

FOR FURTHER INFORMATION CONTACT: Carl E. Kennedy, Counsel, (202) 418-

6625, Commodity Futures Trading Commission, Office of the General

Counsel, Three Lafayette Centre, 1155 21st Street, NW., Washington, DC

20581, facsimile number (202) 418-5524, e-mail: [email protected]

SUPPLEMENTARY INFORMATION:

I. Background

On July 21, 2010, President Obama signed the Dodd-Frank Wall Street

Reform and Consumer Protection Act (``Dodd-Frank Act'').\2\ Title VII

of the Dodd-Frank Act \3\ amended the Commodity Exchange Act (``CEA'')

\4\ to establish a comprehensive new regulatory framework for swaps and

security-based swaps. The legislation was enacted to reduce risk,

increase transparency, and promote market integrity within the

financial system by, among other things: (1) Providing for the

registration and comprehensive regulation of swap dealers and major

swap participants; (2) imposing clearing and trade execution

requirements on standardized derivative products; (3) creating robust

recordkeeping and real-time reporting regimes; and (4) enhancing the

Commodity Futures Trading Commission's (``Commission'' or ``CFTC'')

rulemaking and enforcement authorities with respect to, among others,

all registered entities and intermediaries subject to the Commission's

oversight.

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

Act, Pub. L. 111-203, 124 Stat. 1376 (2010). The text of the Dodd-

Frank Act may be accessed at http://www.cftc.gov./LawRegulation/

OTCDERIVATIVES/index.htm.

\3\ Pursuant to Section 701 of the Dodd-Frank Act, Title VII may

be cited as the ``Wall Street Transparency and Accountability Act of

2010.''

\4\ 7 U.S.C. 1 et seq.

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In addition, Title X of the Dodd-Frank Act--which is entitled the

Consumer Financial Protection Act of 2010 (``CFP Act'')--established a

Bureau of Consumer Financial Protection within the Federal Reserve

System and provided this new Federal agency with rulemaking,

enforcement, and supervisory powers over many consumer financial

products and services and the entities that sell them. In addition, the

CFP Act amends a number of other Federal consumer protection laws

enacted prior to the Dodd-Frank Act, including the Fair Credit

Reporting Act (``FCRA''),\5\ the Fair and Accurate Credit Transactions

Act of 2003 (``FACT Act'') \6\ and Title V of the Gramm-Leach-Bliley

Act \7\ (``GLB Act'').

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\5\ See 15 U.S.C. 1681-1681x. The FCRA, enacted in 1970, sets

standards for the collection, communication, and use of information

bearing on a consumer's credit worthiness, credit standing, credit

capacity, character, general reputation, personal characteristics,

or mode of living that is collected and communicated by consumer

reporting agencies. 15 U.S.C. 1681-1681x.

\6\ See Public Law 108-159, Section 214, 117 Stat. 1952, 1980

(2003). The FACT Act was signed into law on December 4, 2003. The

FACT Act amended the FCRA to enhance the ability of consumers to

combat identity theft, to increase the accuracy of consumer reports,

to allow consumers to exercise greater control regarding the type

and amount of solicitations they receive, and to restrict the use

and disclosure of sensitive medical information. A portion of

section 214 of the FACT Act amended the FCRA to add section 624 to

the FCRA.

\7\ See Public Law 106-102, 113 Stat. 1338 (1999).

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Section 1088 of the CFP Act sets out two amendments to the FCRA and

the FACT Act directing the Commission to promulgate regulations that

are intended to provide privacy protections to certain consumer

information held by any person that is subject to the enforcement

jurisdiction of the Commission. One provision of section 1088 amends

section 214(b) of the FACT Act--which added section 624 to the FCRA in

2003--and directs the Commission to implement the provisions of section

624 of the FCRA with respect to persons that are subject to the CFTC's

enforcement jurisdiction. Section 624 of the FCRA gives consumers the

right to prohibit a CFTC registrant \8\ from using certain information

obtained from an affiliate to make solicitations to that consumer

(hereinafter referred to as the ``affiliate marketing rules''). The

other provision in the CFP Act amends section 628 of the FCRA and

mandates that the Commission implement regulations requiring persons

subject to the CFTC's jurisdiction who possess or maintain consumer

report information in connection with their business activities to

properly dispose of that information (hereinafter referred to as the

``disposal rules'').

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\8\ ``CFTC registrant'' includes a futures commission merchant,

retail foreign exchange dealer, commodity trading advisor, commodity

pool operator, introducing broker, swap dealer or major swap

participant.

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Both sections 624 and 628 of the FCRA required various Federal

agencies charged with regulating financial institutions in possession

of consumer information to issue regulations in final form in

consultation and coordination with each other. In particular, these

sections required the Office of the Comptroller of the Currency

(``OCC''), the Board of Governors of the Federal Reserve System

(``Board''), the Federal Deposit Insurance Corporation (``FDIC''), the

Office of Thrift Supervision (``OTS''), the National Credit Union

Administration (``NCUA'') (collectively, the ``Banking Agencies''), the

Securities and Exchange Commission (``SEC'') and the Federal Trade

Commission (``FTC'') (the SEC, FTC and the Banking Agencies, are

collectively, the ``Agencies'') in consultation and coordination with

one another, to issue rules implementing these sections of the FCRA.

The Agencies already have adopted final affiliate marketing rules and

disposal rules.\9\ Accordingly, the

[[Page 66020]]

Commission is now proposing to adopt similar rules to the final rules

adopted by the Agencies, to the extent possible, to ensure consistency

and comparability.

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\9\ For the disposal rules adopted by the various Federal

agencies, see 69 FR 68690 (Nov. 24, 2004) (FTC); 69 FR 77610 (Dec.

28, 2004) (Banking Agencies); 73 FR 13692 (Mar. 13, 2008) (SEC). For

the affiliate marketing rules adopted by the various Federal

agencies, see 72 FR 61424 (Oct. 31, 2007) (FTC); 72 FR 62910 (Nov.

7, 2007) (Banking Agencies); 74 FR 58204 (Sept. 10, 2009) (SEC).

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The Commission requests comment on all aspects of the proposed

regulations--both the affiliate marketing rules and the disposal

rules--that are highlighted in the discussion in Section II below.

II. Explanation of the Proposed Regulations

A. Affiliate Marketing Rules

Section 624 of the FCRA and the Commission's proposed regulations

generally provide that consumers can block a CFTC registrant from

soliciting the consumer based on ``eligibility information'' (i.e.,

certain financial information, such as information regarding the

consumer's transactions or experiences with the person) that such

registrant received from an affiliate that has or previously had pre-

existing business relationship. Under the proposed regulations, these

registrants can make solicitations to a consumer based on that

consumer's eligibility information if:

(1) The consumer is given clear, conspicuous and concise notice;

(2) The consumer is given a reasonable opportunity to opt out of

such use of the information; and

(3) The consumer does not opt out.

Section 624 governs the use of information by an affiliate, not the

sharing of information with or among affiliates.\10\ While some of the

entities that fall under the Commission's jurisdiction may comply

already with the regulations promulgated by other Federal agencies

implementing the provisions of section 624 of the FCRA, the Commission

seeks comment on its proposed regulations implementing section 624 of

the FCRA.

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\10\ The opt-out right contained in section 624 of the FCRA is

distinct from the affiliate sharing provisions under section

603(d)(2)(A)(iii) of the FCRA.

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Responsibility for Providing Notice and an Opportunity to Opt Out

Section 624 does not specify which affiliate must give the consumer

notice and an opportunity to opt out of the use of the information by

an affiliate for marketing purposes. The Commission has reviewed the

proposed and final regulations issued by the Agencies implementing

section 624 and has determined to take a consistent approach with

respect to which affiliate may provide the initial opt-out notice. As

such, the Commission's proposed regulations provide that the initial

opt-out notice must be provided either by an affiliate that has or

previously had a ``pre-existing business relationship'' with the

consumer, or as part of a joint notice from two or more members of an

affiliated group, provided that at least one of the affiliates on the

joint notice has or previously had a pre-existing business relationship

with the consumer. The Commission agrees with the Agencies that this

approach provides a measure of flexibility and ensures that the notice

is provided by an entity that is known to the consumer. The Commission

invites comment on whether this approach continues to be a reasonable

one.

Scope of Coverage

Section 624 of the FCRA specifies under which circumstances the

provisions under this section and the proposed regulation do not apply.

Specifically, section 624(a)(4) provides that the requirements and

prohibitions of that section do not apply, in part, when: (1) The

covered affiliate receiving the information has a pre-existing business

relationship with the consumer; (2) the information is used to perform

services for another affiliate that does not have such a relationship

with the consumer (subject to certain conditions described below); (3)

the information is used in response to a communication initiated by the

consumer; or (4) the information is used to make a solicitation that

has been authorized or requested by the consumer. The Commission has

incorporated each of these statutory exceptions into the proposed rule.

In addition, the Commission has set out the persons to whom the

proposed rule will apply, as well as the type of consumer information

that is the subject of such rule. The Commission solicits comments on

whether there should be other circumstances to which the proposed

regulations do not apply.

Duration of Opt Out

Section 624(a)(3) of the FCRA provides that a consumer's affiliate

marketing opt-out election shall be effective for at least five years.

Accordingly, the proposed regulations provide that a consumer's opt-out

election would be valid for a period of at least five years (the ``opt-

out period''), beginning as soon as reasonably practicable after the

consumer's opt-out election is received, unless the consumer revokes

the election before the opt-out period has expired. When a consumer

opts out, unless a statutory exception applies, a receiving affiliate

would be unable to make or send marketing solicitations to that

consumer based on his or her eligibility information during the opt-out

period.

As described in the section-by-section analysis below, an extension

notice would be provided to the consumer at the end of the opt-out

period if the receiving affiliate wishes to make marketing

solicitations. Affiliated persons may wish to avoid the cost and burden

of tracking five-year consumer opt-out periods with varying start and

end dates, and delivering extension notices to each consumer at the

appropriate time, by choosing to treat a consumer's opt-out election as

effective for a period longer than five years, including indefinitely.

An affiliate without a pre-existing business relationship that chooses

to honor a consumer's opt-out election for more than five years would

not violate the proposed rules.

In the discussion that follows, the Commission solicits comment on

specific aspects of the proposed regulations on a section-by-section

basis.

Section 162.1--Purpose, Scope and Examples

Proposed section 162.1 sets forth the purpose and scope of the

proposed regulations. This section also provides that examples in this

part are not exclusive; compliance with an example, to the extent

applicable, constitutes compliance with this subpart.

Section 162.2--Definitions

Proposed section 162.2 contains definitions for, inter alia, the

following terms: ``affiliate''; ``clear and conspicuous''; ``common

ownership or common corporate control''; ``communication'';

``company''; ``consumer''; ``covered affiliate''; ``eligibility

information''; ``financial product or service''; ``major swap

participant''; ``person''; ``pre-existing business relationship'';

``solicitation''; and ``swap dealer''.

Affiliate

Section 2 of the FACT Act (which, as noted above, added section 624

to the FCRA) defines the term ``affiliate'' to mean ``persons that are

related by common ownership or affiliated by corporate control.''

The FACT Act and the GLB Act contain a variety of approaches to

define the term ``affiliate.'' Proposed paragraph (a) employs the same

formulation used by the Commission in defining ``affiliate'' under part

160 of the

[[Page 66021]]

Commission's Regulations.\11\ Under the proposed regulation, the

definition of ``affiliate'' will mean any company that is under common

ownership or common corporate control with a covered affiliate.\12\ The

Commission believes it is important to harmonize the treatment of

``affiliate'' across its Regulations as much as possible and to

construe them to have the same meaning. The Commission solicits

comments on whether there should be any meaningful difference between

the Commission's proposed definitions and the FACT Act and the GLB Act

definitions.

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\11\ Part 160 of the Commission's Regulations implement the

provisions of Title V of the GLB Act. Under Title V of the GLB Act,

``financial institutions'' (which include futures commission

merchants, retail foreign exchange dealers, commodity trading

advisors and other CFTC registrants) are required to provide initial

and annual privacy notices to their customers. These requirements

apply only to customers that are individuals who obtain financial

products or services that are primarily used for personal, family,

or household purposes. Part 160 also requires financial institutions

that share nonpublic, personal information about a customer with

non-affiliates to provide the customer with a reasonable opportunity

to opt out of the sharing of such information. See section 160.7 of

the Commission's Regulations.

\12\ The terms ``swap dealer'' and ``major swap participant'' as

used in this proposed regulation refer to the statutory definitions

of such terms as defined in Title VII of the Dodd-Frank Act, and as

may be further defined by the Commission in a future rulemaking. See

section 721(b) of the Dodd-Frank Act, which provides that the

Commission has the authority to adopt rules further defining any

term included in the Dodd-Frank Act, which amends the CEA. See also

section 721(c) which provides that the Commission is required to

adopt a rule to further define, inter alia, the terms ``swap

dealer'' and ``major swap participant'' to include transactions and

entities that have been structured to evade provisions in the Dodd-

Frank Act.

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Clear and Conspicuous

Proposed paragraph (b) defines the term ``clear and conspicuous''

to mean reasonably understandable and designed to call attention to the

nature and significance of the information presented in the notice.

Companies retain flexibility in determining how best to meet the clear

and conspicuous standard. Again, the Commission has decided to

harmonize the definition of this term across its Regulations. In

addition, the Commission believes that the FCRA directs the Commission

to provide specific guidance regarding how to comply with the clear and

conspicuous standard. See 15 U.S.C. 1682s-3(a)(2)(B).

Companies may wish to consider a number of methods to make their

notices clear and conspicuous. A notice or disclosure may be made

reasonably understandable through methods that include, but are not

limited to: Using clear and concise sentences, paragraphs, and

sections; using short explanatory sentences; using bullet lists; using

definite, concrete, everyday words; using active voice; avoiding

multiple negatives; avoiding legal and highly technical business

terminology; and avoiding explanations that are imprecise and are

readily subject to different interpretations. Various methods may also

be used to design a notice or disclosure to call attention to the

nature and significance of the information in it, including, but not

limited to, using: A plain-language heading; a typeface and type size

that are easy to read; wide margins and ample line spacing; or boldface

or italics for key words. Companies that provide the notice on an

Internet web page may use text or visual cues to encourage scrolling

down the page if necessary to view the entire notice, and take steps to

ensure that other elements on the Web site (such as pop-up ads, text,

graphics, hyperlinks, or sound) do not distract attention from the

notice.

When a notice or disclosure is combined with other information,

methods for designing the notice or disclosure to call attention to the

nature and significance of the information in it may include using

distinctive type sizes, styles, fonts, paragraphs, headings, graphic

devices, and groupings or other devices. It is unnecessary, however, to

use distinctive features, such as distinctive type sizes, styles, or

fonts, to differentiate an affiliate marketing opt-out notice from

other components of a required disclosure (e.g., where a privacy notice

under the GLB Act includes several opt-out disclosures in a single

notice). Nothing in the clear and conspicuous standard requires the

segregation of an affiliate marketing opt-out notice when it is

combined with a privacy notice under the GLB Act or other provisions of

law.

It may not be feasible to incorporate all of the methods described

above all of the time. For example, a company may have to use legal

terminology, rather than everyday words, in certain circumstances to

provide a precise explanation. Companies are encouraged, but not

required, to consider the practices described above in designing their

notices or disclosures, as well as using readability testing to devise

notices that are understandable to consumers.

The Commission has proposed model forms in Appendix A that may, but

are not required to, be used to facilitate compliance with the

affiliate marketing notice requirements. The requirement for clear and

conspicuous notices would be satisfied by the appropriate use of one of

the model forms.

Common Ownership or Common Corporate Control

Proposed paragraph (f) defines the term ``common ownership or

common corporate control'' for purposes of Part 162 to mirror the

definition of ``control'' under Part 160. Under the proposal, ``common

ownership or common corporate control'' means the power to exercise a

controlling influence over the management or policies of a company

whether through ownership of securities, by contract, or otherwise. Any

person who owns beneficially, either directly or through one or more

controlled companies, more than 25 percent of the voting securities of

any company is presumed to control the company. Any person who does not

own more than 25 percent of the voting securities of a company will be

presumed not to control the company.

Company

Proposed paragraph (g) defines the term ``company'' to mean any

corporation, limited liability company, business trust, general or

limited partnership, association, or similar organization. This

definition is consistent with the definition of company in Part 160 of

the Commission's Regulations.

Concise

Proposed paragraph (h) defines the term ``concise'' to mean a

reasonably brief expression or statement. The proposal also provides

that a notice required by this subpart may be concise even if it is

combined with other disclosures required or authorized by Federal or

state law. Such disclosures may include, but are not limited to, a GLB

Act privacy notice or other consumer disclosures required under the

FCRA or any other provision of law.

As noted above, the Commission has proposed model forms in Appendix

A that may, but are not required to, be used to facilitate compliance

with the affiliate marketing notice requirements in this subpart. The

requirement for concise notices would be satisfied by the appropriate

use of one of the model forms.

Consumer

Proposed paragraph (i) defines the term ``consumer'' to mean an

individual person, which follows the statutory definition in section

603(c) of the FCRA. For purposes of this definition, an individual

acting through a legal representative qualifies as a consumer. The

Commission notes that the

[[Page 66022]]

definition of ``consumer'' is broader than the definition of that term

in the GLB Act and is consistent with the definitions used by the

Agencies in their rulemakings promulgated under section 624 of the

FCRA. The Commission believes that the use of distinct definitions of

``consumer'' in the two statutes reflects differences in the scope and

objectives of each statute.

Covered Affiliate

Proposed paragraph (h) defines the term ``covered affiliate'' to

mean a futures commission merchant, retail foreign exchange dealer,

commodity trading advisor, commodity pool operator, introducing broker,

swap dealer or major swap participant, which is subject to the

jurisdiction of the Commission.

Eligibility information

Under proposed paragraph (j), the term ``eligibility information''

means any information that would be a consumer report if the exclusions

from the definition of ``consumer report'' in section 603(d)(2)(A) of

the FCRA did not apply.\13\ Examples of the type of information that

would fall within the definition of ``eligibility information''

includes an affiliate's own transaction or experience information, such

as information about a consumer's account history with that person, and

other information, such as information from credit bureau reports or

applications. The Commission's proposal defines the term ``eligibility

information'' consistently with the definitions in the Agencies'

regulations promulgated pursuant to section 624 of the FCRA.

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\13\ Section 603(d)(2)(A) of the FCRA provides that the term

``consumer report'' does not include ``(i) [any] report containing

information solely as to transactions or experiences between the

consumer and the person making the report; (ii) communication of

that information among persons related by common ownership or

affiliated by corporate control; or (iii) communication of other

information among persons related by common ownership or affiliated

by corporate control, if it is clearly and conspicuously disclosed

to the consumer that the information may be communicated among such

persons and the consumer is given the opportunity, before the time

that the information is initially communicated, to direct that such

information not be communicated among such persons * * *.'' Thus,

the scope of what falls within the definition of ``eligibility

information'' is broader than, and includes, information that would

fall within the definition of ``consumer report''.

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The term ``eligibility information'' does not include aggregate or

blind data that does not contain personal identifiers. Examples of

personal identifiers include account numbers, names, or addresses, as

well as Social Security numbers, driver's license numbers, telephone

numbers, or other types of information that, depending on the

circumstances or when used in combination, could identify the consumer.

The Commission invites comment on whether the term ``eligibility

information'', as defined, appropriately reflects the scope of what

information should be covered by this proposed regulation.

Financial Product or Service

Proposed paragraph (l) defines the term ``financial product or

service'' to mean any product or service that a futures commission

merchant, retail foreign exchange dealer, commodity trading advisor,

commodity pool operator, introducing broker, major swap participant or

swap dealer could offer that is subject to the Commission's

jurisdiction. This definition is consistent with the definition of

financial product or service in Part 160 of the Commission's

Regulations, with certain revisions made to fit within the scope of the

proposed regulations. The Commission invites comment on whether the

term ``financial product or service'', as defined, appropriately

captures the types of products or services that should be covered by

this regulation.

Major Swap Participant

Proposed paragraph (n) defines the term ``major swap participant''

to have the same meaning as in section 1a(33) of the Commodity Exchange

Act, as may be further defined by the Commission's Regulations, and

includes any person registered as such thereunder.

Person

Proposed paragraph (o) defines the term ``person'' to mean any

individual, partnership, corporation, trust, association, or other

entity. For purposes of this part, actions taken by an agent on behalf

of a person that are within the scope of the agency relationship will

be treated as actions of that person. The definition of person in the

proposed regulation is consistent with the definition of person in CFTC

Regulation 1.3(u).

Pre-Existing Business Relationship

Proposed paragraph (p) defines this term to mean a relationship

between a person (or a person's licensed agent) and a consumer based on

the following: (1) A financial contract between the person and the

consumer that is in force on the date on which the consumer is sent a

solicitation by this subpart; (2) the purchase, rental, or lease by the

consumer of a person's financial products or services, or a financial

transaction (including holding an active account or a policy in force

or having another continuing relationship) between the consumer and the

person, during the 18-month period immediately preceding the date on

which a solicitation covered by this subpart is sent to the consumer;

or (3) an inquiry or application by the consumer regarding a financial

product or service offered by that person during the three-month period

immediately preceding the date on which the consumer is sent a

solicitation covered by this subpart. The proposed definition generally

tracks the statutory definition contained in section 624 of the FCRA,

with certain revisions for clarity.

The Commission believes that, for purposes of this proposed

regulation, an inquiry should include any affirmative request by a

consumer for information, such that the consumer would reasonably

expect to receive information from the affiliate about its financial

products or services. In addition, the Commission believes that a

consumer would not reasonably expect to receive information from the

affiliate if the consumer does not request information or does not

provide contact information to the affiliate.

The Commission has the statutory authority to define in the

regulations other circumstances that qualify as a pre-existing business

relationship. The Commission has not proposed to exercise this

authority at this time to expand the definition of ``pre-existing

business relationship'' beyond the circumstances set forth in the

statute. The Commission solicits comments, however, on whether there

are other circumstances that the Commission should include within the

definition of ``pre-existing business relationship''.

Solicitation

Proposed paragraph (q) defines the term ``solicitation'' to mean

the marketing of a financial product or service initiated by a covered

affiliate to a particular consumer that is based on eligibility

information communicated to the covered affiliate by its affiliate and

is intended to encourage the consumer to purchase the covered

affiliate's financial product or service. A communication, such as a

telemarketing solicitation, direct mail, or e-mail, is a solicitation

if it is directed to a specific consumer based on eligibility

information. The proposed definition of solicitation does not, however,

include communications that are directed at the general public without

regard to eligibility information, even if those communications are

intended to encourage consumers to purchase

[[Page 66023]]

financial products and services from the person initiating the

communications. The proposed definition tracks the statutory definition

contained in section 624 of the FCRA, with certain revisions for

clarity.

The proposed definition of ``solicitation'' does not distinguish

between different mediums of communication. A determination of whether

a marketing communication constitutes a solicitation will depend upon

the facts and circumstances. The Commission has decided not to make

those determinations in this rulemaking.

The Commission has the statutory authority to determine by

regulation that other communications do not constitute a solicitation.

The Commission has decided to use the same definition of

``solicitation'' adopted by the Agencies, and as a result, has not

proposed to exercise its authority under section 624 at this time to

specify other communications that would not be deemed ``solicitations''

beyond the circumstances set forth in the statute.

The Commission solicits comment, however, on whether there are

other communications that the Commission should determine do not meet

the definition of ``solicitation.'' The Commission also solicits

comment on whether, and to what extent, various tools used in Internet

marketing, such as popup ads, may constitute solicitations as opposed

to communications directed at the general public, and whether further

guidance is needed to address Internet marketing.

Swap Dealer

Proposed paragraph (r) defines the term ``swap dealer'' to have the

same meaning as in section 1a(49) of the Commodity Exchange Act, as may

be further defined by the Commission's Regulations, and includes any

person registered as such thereunder.

Section 162.3--Affiliate Marketing Opt Out and Exceptions

Proposed section 162.3 establishes the basic rules governing the

requirement to provide the consumer with notice, a reasonable

opportunity and a simple method to opt out of a company's use of

eligibility information that it obtains from an affiliate for the

purpose of making solicitations to the consumer.

General Notice Requirement

Proposed paragraph (a) contains three conditions that must be met

before a covered affiliate that does not have a pre-existing business

relationship with a consumer may use eligibility information about the

consumer that it receives from a affiliate that does have such a

relationship to make a solicitation for marketing purposes to that

consumer. First, the proposal provides that it must be clearly and

conspicuously disclosed to the consumer in writing or, if the consumer

agrees, electronically, in a concise notice that the covered affiliate

that does not have a pre-existing business relationship may use shared

eligibility information to make solicitations to the consumer. Second,

the consumer must be provided a reasonable opportunity and a reasonable

and simple method to opt out of the use of that eligibility information

to make solicitations to the consumer. Third, the consumer must not

have opted out.

The Commission believes that an opt-out notice may not be provided

orally. Indeed, the Commission is concerned that with oral notice, it

may be impossible to ensure that a consumer receives the appropriate

notice or information on the right to opt out. In addition, the

Commission is concerned that oral notice may create enforcement

barriers for the Commission.

Persons Responsible for Satisfying the Notice Requirement

Section 624 does not specify explicitly which affiliate must

provide the opt-out notice to the consumer. Proposed paragraph (b) sets

forth the duty of the persons responsible for satisfying the notice

requirement under section 624. This proposal is consistent with the

approach taken by the Agencies in their respective rulemakings pursuant

to section 624. The proposed regulation strives to provide flexibility

by allowing either: (1) The affiliate with a pre-existing business

relationship to report the initial opt-out notice directly to the

consumer; or (2) one or more of affiliates to provide a joint notice to

the consumer, provided that at least one of the affiliates has or

previously had the pre-existing business relationship with the

consumer. The Commission solicits comments on whether this approach

will provide meaningful or effective notice and will not lead to

consumer confusion as to whether the opt-out notice is itself a

solicitation.

Exceptions to the General Rule

Paragraph (c) contains exceptions to the requirements of this

subpart. It incorporates each of the following statutory exceptions to

the affiliate marketing notice and opt-out requirements set forth in

section 624(a)(4) of the FCRA: (1) Using the information to make a

solicitation to a consumer with whom the affiliate has a pre-existing

business relationship; (2) using the information to facilitate

communications to an individual for whose benefit the affiliate

provides employee benefit or other services under a contract with an

employer related to, and arising out of, a current employment

relationship or an individual's status as a participant or beneficiary

of an employee benefit plan; (3) using the information to perform

services for another affiliate, unless the services involve sending

solicitations on behalf of the other affiliate and such affiliate is

not permitted to send such solicitations itself as a result of the

consumer's decision to opt out; (4) using the information to make

solicitations in response to a communication initiated by the consumer;

(5) using the information to make solicitations in response to a

consumer's request or authorization for a solicitation; or (6) if

compliance with the requirements of section 624 by the affiliate would

prevent that affiliate from complying with any provision of state

insurance laws pertaining to unfair discrimination in a state where the

affiliate is lawfully doing business. Several of these exceptions are

discussed immediately below.

Proposed paragraph (c)(1) clarifies that the provisions of this

subpart do not apply where the covered affiliate using the information

to make a solicitation to a consumer has a ``pre-existing business

relationship'' with that consumer, a key term that is discussed in

detail above.

Proposed paragraph (c)(3) clarifies that the provisions of this

subpart do not apply where the information is used to perform services

for another affiliate, except that the exception does not permit the

service provider to make solicitations on behalf of itself or an

affiliate if the service provider or the affiliate, as applicable,

would not be permitted to make such solicitations as a result of the

consumer's election to opt out. Thus, when the notice has been provided

to a consumer and the consumer has opted-out, a covered affiliate

subject to the consumer's opt-out election that has received

eligibility information from its affiliate may not circumvent the opt-

out notice requirement by instructing its affiliate or another

affiliate to make solicitations to the consumer on its behalf. The

Commission requests comment on whether there are other means of

circumvention that the final rule should also address.

Proposed paragraph (c)(4) incorporates the statutory exception for

information used in response to a communication initiated by the

consumer. The proposed rule clarifies

[[Page 66024]]

that this exception may be triggered by an oral, electronic, or written

communication initiated by the consumer. To be covered by the proposed

exception, use of eligibility information must be responsive to the

communication initiated by the consumer. For example, if a consumer

calls a covered affiliate to ask about business locations and hours,

the covered affiliate may not then use eligibility information to make

solicitations to the consumer about specific financial products or

services because those solicitations would not be responsive to the

consumer's communication. Conversely, if the consumer calls a covered

affiliate to ask about its financial products or services, then

solicitations related to those financial products or services would be

responsive to the communication and thus be permitted under the

exception. The time period during which solicitations remain responsive

to the consumer's communication will depend on the facts and

circumstances. The Commission does not intend for this exception to

apply to a communication where a covered affiliate makes the initial

call and leaves a message for the consumer to call back, and the

consumer responds.

Proposed paragraph (c)(5) provides that the provisions of this

subpart do not apply where the information is used to make

solicitations affirmatively authorized or requested by the consumer.

This provision may be triggered by an oral, electronic, or written

authorization or request by the consumer. Under this exception, the

consumer may provide the authorization or make the request either

through the company with whom the consumer has a business relationship

or directly to the covered affiliate that will make the solicitation.

In addition, the duration of the authorization or request will depend

on the facts and circumstances.

The exceptions in proposed paragraphs (c)(1), (4), and (5)

described above may overlap in certain situations. For example, if a

customer makes a telephone call to the commodity trading advisor's

clearing broker affiliate and requests information about its services,

the clearing broker affiliate may use information about the consumer it

obtains from the commodity trading advisor to make solicitations in

response to the telephone call initiated by the consumer under the

exception in paragraph (c)(4) for responding to a communication

initiated by the consumer. In addition, the consumer's request for

information from the clearing broker affiliate triggers the exceptions

in paragraph (c)(1) for inquiries by the consumer regarding a financial

product or service offered by the clearing broker affiliate under the

statutory definition of a ``pre-existing business relationship'' as

well as the exception in paragraph (c)(5) for a use in response to a

solicitation requested by the consumer.

Making Solicitations

Proposed paragraph (d) sets forth when a covered affiliate makes a

solicitation to a consumer. Section 624 does not describe what a

covered affiliate must do in order to make a solicitation. Similarly

the legislative history does not contain guidance as to the meaning of

making a solicitation. For that reason, the Commission believes it

important to provide clear guidance regarding what activities

constitute making a solicitation. Proposed section 162.3(d)(1) provides

that a covered affiliate makes a solicitation for marketing purposes to

a consumer if: (i) The covered affiliate receives eligibility

information from an affiliate; (ii) the covered affiliate uses that

eligibility information to do one of the following--identify the

consumer or type of consumer to receive a solicitation, establish the

criteria used to select the consumer to receive a solicitation, or

decide which of its financial products or services to market to the

consumer or tailor its solicitation to that consumer; and (iii) as a

result of the covered affiliate's use of the eligibility information,

the consumer is provided a solicitation about the covered affiliate's

financial products or services.

The Commission recognizes that several common industry practices

create issues in applying the provisions in proposed subparagraph

(d)(1). First, affiliated companies often use a common database as the

repository for eligibility information obtained by various affiliates,

and information in that database may be accessible to multiple

affiliates. Second, affiliated companies often use service providers to

perform marketing activities, and some of those service providers may

provide services for a number of different affiliates. Third, a covered

affiliate may use its own eligibility information to market the

financial products or services of another affiliate. Proposed sections

162.3(d)(2)-(5) seek to address these issues.

Proposed subparagraph (d)(2) provides that a covered affiliate may

receive eligibility information from an affiliate in various ways,

including when the covered affiliate places that information into a

common database that the covered affiliate may access. Thus, the use of

a common database may satisfy the first element of the rule outlined in

subparagraph (d)(1) (i.e., through a common database, the covered

affiliate receives eligibility information from an affiliate).

Proposed subparagraph (d)(3) provides that a covered affiliate

receives or uses an affiliate's eligibility information if a service

provider acting on behalf of the covered affiliate receives or uses

that information in the manner described in subparagraphs (d)(1)(i) or

(d)(1)(ii), except as provided in subparagraph (d)(5), which is

discussed below. Proposed subparagraph (d)(3) also provides that all

relevant facts and circumstances will determine whether a service

provider is acting on behalf of a covered affiliate when it receives or

uses its affiliate's eligibility information in connection with

marketing the covered affiliate's financial products or services.

Proposed subparagraph (d)(4) describes two situations where a

covered affiliate is deemed not to have made a solicitation subject to

this subpart. In particular, this section provides that unless a

covered affiliate uses a consumer's eligibility information received

from an affiliate in a manner described in section 162.3(d)(1)(ii)

(i.e., identify the consumer, establish criteria to select the

consumer, or decide which financial product or service to market to the

consumer), the covered affiliate does not make a solicitation for the

purposes of this subpart if the affiliate: (i) uses its own eligibility

information obtained in connection with that relationship to market the

covered affiliate's financial products or services; or (ii) directs its

service provider to use the affiliate's own eligibility information to

market the covered affiliate's financial products or services. Both

situations (i) and (ii) assume that the covered affiliate whose

financial products or services are being marketed has not used

eligibility information received from the affiliate. In contrast, the

core concept underlying situation (ii) is that the affiliate controls

the actions of the service provider using that information. Since the

affiliate controls the service provider's use of the eligibility

information, the solicitation should not be attributed to the covered

affiliate whose financial products or services will be marketed to the

consumers. Instead, the solicitation should be attributed to the

affiliate.

The Commission also recognizes that there may be situations where

the covered affiliate whose financial products or services are being

marketed does communicate and have contact

[[Page 66025]]

with the service provider of the affiliate. This situation might arise,

for example, where the service provider performs services for various

affiliates relying on information maintained in and accessed from a

common database. In certain circumstances, the covered affiliate whose

financial products or services are being marketed may communicate with

the service provider, yet the service provider is still acting on

behalf of the affiliate when it uses that affiliate's eligibility

information in connection with marketing the covered affiliate's

financial products or services. Proposed subparagraph (d)(5) describes

the conditions under which a service provider (including an affiliated

or third-party service provider) would be deemed to be acting on behalf

of the affiliate that has or previously had a pre-existing business

relationship with a consumer, rather than the covered affiliate whose

financial products or services are being marketed, notwithstanding

direct communications between the covered affiliate and the service

provider.

Proposed subparagraph (d)(5) builds upon the concept of control of

a service provider and thus is a natural outgrowth of proposed

subparagraph (d)(4). Under the conditions set out in subparagraph

(d)(5), the service provider is acting on behalf of an affiliate that

obtained the eligibility information in connection with a pre-existing

business relationship with the consumer because, inter alia, the

affiliate controls the actions of the service provider in connection

with the service provider's receipt and use of the eligibility

information. This provision is designed to minimize uncertainty that

may arise from application of the facts and circumstances test in

subparagraph (d)(3) to cases that involve direct communications between

a service provider and a covered affiliate whose financial products and

services will be marketed to consumers.

In particular, proposed subparagraph (d)(5) provides that a covered

affiliate does not make a solicitation subject to this subpart if a

service provider receives eligibility information (regardless of

whether such information is received through a common database or

otherwise) from an affiliate and the service provider uses that

eligibility information to market the covered affiliate's financial

products or services to the consumer, only when five conditions are

met.

Those five conditions are:

First, the affiliate controls access to and use of its

eligibility information by the service provider (including the right to

establish specific terms and conditions under which the service

provider may use such information to market the financial products or

services of the covered affiliate that does not have such

relationship). This requirement must be set forth in a written

agreement between the affiliate and the service provider. The affiliate

may demonstrate control by, for example, establishing and implementing

reasonable policies and procedures applicable to the service provider's

access to and use of its eligibility information.

Second, the affiliate establishes specific terms and

conditions under which the service provider may access and use that

eligibility information to market the financial products or services of

the covered affiliate that does not have a pre-existing business

relationship (or those of affiliates generally) to the consumer, and

periodically evaluates the service provider's compliance with those

terms and conditions. These terms and conditions may include the

identity of the affiliated companies whose financial products or

services may be marketed to the consumer by the service provider, the

types of financial products or services of affiliated companies that

may be marketed, and the number of times the consumer may receive

marketing materials. The affiliate must set forth in writing the

specific terms and conditions, but need not set forth such terms and

conditions in a written agreement. If a periodic evaluation by the

affiliate that has or previously had a pre-existing business

relationship with a consumer reveals that the service provider is not

complying with those terms and conditions, the Commission expects the

affiliate to take appropriate corrective action.

Third, the affiliate requires the service provider to

implement reasonable policies and procedures designed to ensure that

the service provider uses its eligibility information in accordance

with the terms and conditions established by the such affiliate

relating to the marketing of the financial products or services of the

covered affiliate that does not have a pre-existing business

relationship. This requirement must be set forth in a written agreement

between the affiliate and the service provider.

Fourth, the affiliate that has or previously had a pre-

existing business relationship with a consumer is identified on or with

the marketing materials provided to the consumer. This requirement will

be construed flexibly. For example, the affiliate may be identified

directly on the marketing materials, on an introductory cover letter,

on other documents included with the marketing materials, such as a

periodic statement, or on the envelope which contains the marketing

materials.

Fifth, the covered affiliate that does not have a pre-

existing business relationship with the consumer does not directly use

the eligibility information of the affiliate that does have such

relationship in the manner described in section 162.3(d)(1)(ii). These

five conditions together ensure that the service provider is acting on

behalf of the affiliate because that affiliate controls the service

provider's receipt and use of such affiliate's eligibility information.

Section 162.4--Scope and Duration of Opt Out

Scope of Opt Out

The scope of the opt-out election is derived from language of

section 624(a)(2)(A) of the FCRA and generally depends upon the content

of the opt-out notice. Proposed section 162.4(a)(1) provides that,

except as otherwise provided in that section, a consumer's election to

opt out prohibits any covered affiliate subject to the scope of the

opt-out notice from using the eligibility information received from

another affiliate as described in the notice to make solicitations for

marketing purposes to the consumer. The scope of the election in the

proposed regulations is consistent with the scope of the final

regulations promulgated by the Agencies.

Proposed section 162.4(a)(2)(i) clarifies that, in the context of a

continuing relationship, an opt-out notice may apply to eligibility

information obtained in connection with a single continuing

relationship, multiple continuing relationships, continuing

relationships established subsequent to delivery of the opt-out notice,

or any other transaction with the consumer. Proposed section

162.4(a)(2)(ii) provides the following examples of a continuing

relationship: (i) The covered affiliate is a futures commission

merchant through whom a consumer has opened an account, or that carries

the consumer's account on a fully-disclosed basis, or that effects or

engages in commodity interest transactions with or for a consumer, even

if the covered affiliate does not hold any assets of the consumer; (ii)

the covered affiliate is an introducing broker that solicits or accepts

specific orders for trades; (iii) the covered affiliate is a commodity

trading advisor with whom a consumer has a contract or subscription,

either written or oral, regardless of whether the advice is

standardized, or is based on, or tailored

[[Page 66026]]

to, the commodity interest or cash market positions or other

circumstances or characteristics of the particular consumer; (iv) the

covered affiliate is a commodity pool operator, and accepts or receives

from the consumer, funds, securities, or property for the purpose of

purchasing an interest in a commodity pool; (v) the covered affiliate

holds securities or other assets as collateral for a loan made to the

consumer, even if the covered affiliate did not make the loan or do not

affect any transactions on behalf of the consumer; or (vi) the covered

affiliate regularly effects or engages in commodity interest

transactions with or for a consumer even if covered affiliate does not

hold any assets of the consumer.

Proposed section 162.4(a)(3)(i) limits the scope of an opt-out

notice that is not connected with a continuing relationship. This

section provides that if there is no continuing relationship between

the consumer and a covered affiliate or its affiliate, and if the

covered affiliate or its affiliate provides an opt-out notice to a

consumer that relates to eligibility information obtained in connection

with a transaction with the consumer, such as an isolated transaction,

the opt-out notice only applies to eligibility information obtained in

connection with that transaction. The notice cannot apply to

eligibility information that may be obtained in connection with

subsequent transactions or a continuing relationship that may be

subsequently established by the consumer with the covered affiliate or

its affiliate. Proposed section 162.4(a)(3)(ii) provides the following

examples of where no continuing relationship exists: (i) The covered

affiliate has acted solely as a ``finder'' for a futures commission

merchant, and the covered affiliate does not solicit or accept specific

orders for trades; or (ii) the covered affiliate has solicited the

consumer to participate in a pool or to direct his or her account and

he or she has not provided the covered affiliate with funds to

participate in a pool or entered into any agreement with the covered

affiliate to direct his or her account.

Proposed section 162.4(a)(4) provides that a consumer may be given

the opportunity to choose from a menu of alternatives when electing to

prohibit solicitations. An opt-out notice may give the consumer the

opportunity to elect to prohibit: solicitations from certain types of

affiliates covered by the opt-out notice but not other types of

affiliates covered by the notice; solicitations based on certain types

of eligibility information but not other types of eligibility

information; or solicitations by certain methods of delivery but not

other methods of delivery, so long as one of the alternatives is the

opportunity to prohibit all solicitations from all of the affiliates

that are covered by the notice. The Commission believes that the

language of section 624(a)(2)(A) of the FCRA requires the opt-out

notice to contain a single opt-out option for all solicitations within

the scope of the notice. The Commission solicits comments as to whether

it would be burdensome for consumers to receive a number of different

opt-out notices, even from the same affiliate, under the circumstances

described above.

Proposed section 162.4(a)(5) contains a special rule for notice

following termination of a continuing relationship. This proposed

regulation provides that a consumer must be given a new opt-out notice

if, after all continuing relationships with a covered affiliate or its

affiliate have been terminated, the consumer subsequently establishes a

new continuing relationship with the covered affiliate or the same or a

different affiliate and the consumer's eligibility information is used

to make a solicitation. In addition, this section affords the consumer

and the company a fresh start following termination of all continuing

relationships by requiring a new opt-out notice if a new continuing

relationship is subsequently established.

The new opt-out notice must apply, at a minimum, to eligibility

information obtained in connection with the new continuing

relationship. The new opt-out notice may apply more broadly to

information obtained in connection with a terminated relationship and

give the consumer the opportunity to opt out with respect to

eligibility information obtained in connection with both the terminated

and the new continuing relationships. Further, the consumer's failure

to opt out does not override a prior opt-out election by the consumer

applicable to eligibility information obtained in connection with a

terminated relationship that is still in effect, regardless of whether

the new opt-out notice applies to eligibility information obtained in

connection with the terminated relationship. The Commission notes,

however, that where a consumer was not given an opt-out notice in

connection with the initial continuing relationship because eligibility

information obtained in connection with that continuing relationship

was not shared with affiliates for use in making solicitations, an opt-

out notice provided in connection with a new continuing relationship

would have to apply to any eligibility information obtained in

connection with the terminated relationship that is to be shared with

affiliates for use in making future solicitations.

Duration of Opt-Out Election

Proposed section 162.4(b) provides that an opt-out election must be

effective for a period of at least five years beginning when the

consumer's opt-out election is received and implemented, unless the

consumer subsequently revokes the opt-out election in writing or, if

the consumer agrees, electronically. The Commission believes that this

approach is consistent with the approach taken by the Agencies and the

Commission's approach in the GLB Act privacy rule in Part 160. The

Commission does not believe it is necessary or appropriate to permit

oral revocation.

The Commission believes that this approach provides companies with

flexibility in complying with the proposed regulations. For example, to

avoid the cost and burden of tracking consumer opt outs over five-year

periods with varying start and end dates and sending out extension

notices in five-year cycles, some companies may choose to treat the

consumer's opt-out election as effective for a period longer than five

years, including in perpetuity, unless revoked by the consumer. A

company that chooses to honor a consumer's opt-out election for more

than five years would not violate the proposed regulations.

The Commission seeks comment on whether the consumers should be

given the opportunity to opt-out permanently from receiving marketing

solicitations from affiliates regardless of the opt-out period stated

in the opt-out notice. This approach would provide consumers with the

ability to avoid receiving and responding to extension notices every

five years.

Time Period To Opt Out

Proposed section 162.4(c) provides that a consumer may opt out at

any time. Indeed, a consumer may opt out even if the consumer did not

opt out in response to the initial opt-out notice or if the consumer's

election to opt out was not prompted by an opt-out notice. Regardless

of when the consumer opts out, the opt out must be effective for a

period of at least five years.

No Effect on Opt-Out Period

Proposed section 162.4(d) provides that an opt-out period may not

be shortened by sending a renewal notice to the consumer before

expiration of the opt-out period, even if the consumer does not renew

the opt out.

[[Page 66027]]

Section 162.5--Contents of Opt-Out Notice; Consolidated and Equivalent

Notices

Contents in General

The Commission believes that proposed section 162.5(a) reflects the

intent of Congress, as expressed in section 624(a)(2)(B) of the FCRA,

which provides that the notice required by this proposed regulation

must be in writing, ``clear, conspicuous, and concise,'' and that the

method for opting out must be ``simple.'' Specifically, section

162.5(a)(1)(i)(A) provides that all opt-out notices must identify, by

name, the affiliate that has or previously had a pre-existing business

relationship with a consumer and is providing the notice. Section

162.5(a)(1)(B) provides that a group of affiliates may jointly provide

the notice. If the notice is provided jointly by multiple affiliates

and each affiliate shares a common name, then the notice may indicate

that it is being provided by multiple companies with the same name or

multiple companies in the same group or family of companies. Acceptable

ways of identifying the multiple affiliates providing the notice

include stating that the notice is provided by ``all of the XYZ

companies,'' or by listing the name of each affiliate providing the

notice. A representation that the notice is provided by ``the XYZ

commodity trading advisors and commodity pools'' applies to all

companies in those categories, not just some of those companies. But if

the affiliates providing the notice do not all share a common name,

then the notice must either separately identify each affiliate by name

or identify each of the common names used by those affiliates.

Proposed section 162.5(a)(1)(ii) provides that an opt-out notice

must contain a list of the affiliates or types of affiliates covered by

the notice. The notice may apply to multiple affiliates and to

companies that become affiliates after the notice is provided to the

consumer. The rule for identifying the affiliates covered by the notice

is substantially similar to the rule for identifying the affiliates

providing the notice in section 162.5(a)(i), as described in the

previous paragraph.

Proposed sections 162.5(a)(1)(iii)-(vii), respectively, require the

opt-out notice to include the following: A general description of the

types of eligibility information that may be used to make solicitations

to the consumer; a statement that the consumer may elect to limit the

use of eligibility information to make solicitations to the consumer; a

statement that the consumer's election will apply for the specified

period of time stated in the notice and, if applicable, that the

consumer will be allowed to renew the election once that period

expires; if the notice is provided to consumers who may have previously

opted out, that the consumer who has chosen to limit marketing offers

does not need to act again until the consumer receives a renewal

notice; and a reasonable and simple method for the consumer to opt out.

Proposed section 162.5(a)(2) provides that the opt-out notice must

specify the length of the opt-out period, if the consumer is granted an

opt-out period longer than five years. Proposed section 162.5(a)(3),

however, provides that a company that subsequently chooses to increase

the duration of the opt-out period that it previously disclosed or

honor the opt out in perpetuity has no obligation to provide a revised

notice to the consumer. In that case, the result is the same as if the

company established a five-year opt-out period and then did not send a

renewal notice at the end of that period. So long as no solicitations

are made using eligibility information received from an affiliate,

there would be no violation of the statute or regulation for failing to

send a renewal notice in this situation. A covered affiliate receiving

eligibility information from an affiliate would be prohibited from

using that information to make solicitations to a consumer unless a

renewal notice is first provided to the consumer and the consumer does

not renew the opt out.

Use of the model form in Appendix A, in appropriate circumstances,

would comply with paragraph (a), but is not required.

Joint Relationships

Proposed section 162.5(b) sets out a rule that would apply when two

or more consumers jointly obtain a financial product or service from an

affiliate subject to the rule (referred to in the proposed regulation

as ``joint consumers''). Under the proposal, an affiliate subject to

the rule could provide a single opt-out notice to joint consumers. The

notice would have had to indicate whether the affiliate would consider

an opt out by a joint consumer as an opt out by all of the associated

consumers, or whether each consumer would have to opt out separately.

The affiliate could not require all consumers to opt out before

honoring an opt-out election by one of the joint consumers. The revised

provision is substantively similar to the joint relationships provision

of the GLB Act privacy rule in Part 160, except to the extent that rule

refers to the sharing of information among affiliates. The Commission

requests comments on whether information about a joint account should

be allowed to be used for making solicitations to a joint consumer who

has not opted out.

Alternative Contents

Proposed paragraph (c) provides that if the consumer is afforded an

alternative but broader right to opt out of receiving marketing than is

required by this subpart, the requirements of proposed section 162.5(a)

may be satisfied by providing the consumer with a clear, conspicuous,

and concise notice that accurately discloses the consumer's opt-out

rights.

Consolidated and Equivalent Notices

Proposed section 162.5(d) provides that an opt-out notice required

by this subpart could be coordinated and consolidated with any other

notice or disclosure required to be issued under any other provision of

law, including but not limited to the notice required by Title V of the

GLB Act. In addition, proposed section 162.5(e) provides that a notice

or other disclosure that is equivalent to the notice required by this

subpart, and that is provided to a consumer together with disclosures

required by any other provision of law, would satisfy the requirements

of this section.

Including an affiliate marketing opt-out notice under this subpart

and an initial or annual notice under the GLB Act raises special

issues, however, because GLB Act notices typically state that the

consumer does not need to opt out again if the consumer previously

opted-out. This statement would be accurate if the company and its

affiliates choose to make the affiliate marketing opt out effective in

perpetuity. However, if the opt-out period is limited to a defined

period of five years or more, such a statement would not be accurate

with respect to the extension notice, and the notice would have to make

clear to the consumer the necessity of opting-out again in order to

extend the opt-out election.

The Commission solicits comments on the consolidation of the

affiliate marketing notice under this subpart with the GLB Act privacy

notices in Part 160.

Model Notices

Proposed section 162.5(f) states that proposed model notices are

provided in Appendix A of Part 162. The Commission has provided these

proposed model notices to facilitate compliance with the proposed rule.

It should be noted, however, that the

[[Page 66028]]

proposed rule does not require use of the model notices.

Section 162.6--Reasonable Opportunity to Opt Out

Proposed paragraph (a) sets forth the general rule prohibiting

covered affiliates from using eligibility information about a consumer

received from an affiliate to make a solicitation to such consumer

about the covered affiliate's financial products or services, unless

the consumer is provided a reasonable opportunity to opt out, as

required by the proposed regulation. The general rule does not set a

mandatory waiting period in all cases. Instead, proposed paragraph (b)

sets forth several examples illustrating what constitutes a reasonable

opportunity to opt out. Paragraph (b) does maintain, however, a safe

harbor of 30 days to provide certainty to entities that choose to

follow the 30-day waiting period. Although 30 days is a safe harbor in

all cases, an affiliate subject to the rule providing an opt-out notice

may decide, at its option, to give consumers more than 30 days in which

to decide whether to opt out. A shorter waiting period could be

adequate in certain situations, depending on the circumstances, in

accordance with the general test for a reasonable opportunity to opt

out.

Section 162.7--Reasonable and Simple Methods of Opting Out

Section 624 of the FCRA requires that consumers are given

reasonable and simple methods of opting out. Proposed paragraph (a)

prohibits covered affiliates from using eligibility information about a

consumer received from an affiliate to make a solicitation to such

consumer about the financial products or services of the covered

affiliate, unless the consumer is provided a reasonable and simple

method to opt out, as required by this proposed regulation.

Proposed paragraph (b) sets forth reasonable and simple methods of

opting out. Such methods include designating a check-off box in a

prominent position on an opt-out election form, including a reply form

and a self-addressed envelope (in a mailing), providing an electronic

means that can be electronically mailed or processed through an

Internet Web site, providing a toll-free telephone number, or

exercising an opt-out election through whatever means are acceptable

under a consolidated privacy notice required under other laws.

Proposed paragraph (c) clarifies that each consumer may be required

to opt out through a specific medium, as long as that medium is

reasonable and simple for that consumer.

Section 162.8--Acceptable Delivery of Opt-Out Notices

Proposed section 162.8(a) provides that an affiliate that has or

previously had a pre-existing business relationship with a consumer

must deliver an opt-out notice so that each consumer can reasonably be

expected to receive actual notice. For opt-out notices that are

delivered electronically at the consumer's election, proposed section

162.8(b) provides that opt-out notices may be delivered either in

accordance with the electronic disclosure provisions in section 101 of

the Electronic Signatures in Global and National Commerce Act, 15

U.S.C. 7001 et seq. or in accordance with CFTC Regulation 1.4.

Section 162.9--Renewal of Opt Out

Proposed section 162.9 describes the procedures for renewal or

extension of an opt-out election. Proposed subparagraph (a)(1) provides

that, after the opt-out period expires, and unless an exception in

section 162.3(c) applies, a covered affiliate may not make a

solicitation to a consumer based on eligibility information received by

an affiliate unless: The consumer has been given a renewal notice that

complies with requirements of this section and the other sections 162.6

through 162.8; the consumer is given a reasonable opportunity and a

reasonable and simple to renew the opt-out election; and the consumer

does not opt out. Proposed subparagraph (a)(2) provides that the

renewal period for each renewal shall be a period of not less than five

years. Proposed subparagraph (a)(3) outlines which affiliates may

provide notice required by this section. A renewal notice must be

provided either by: The affiliate that provided the previous opt-out

notice or its successor; or as part of a joint renewal notice from two

or more members of an affiliated group of companies, or their

successors, that jointly provided the previous opt-out notice. The

Commission believes that this subparagraph will provide flexibility to

account for changes in the corporate structure, which may result from

mergers and acquisitions, corporate names changes, and other events.

Proposed paragraph (b) addresses the contents of a renewal or

extension notice. The Commission recognizes that the content of the

renewal notice differs from the content of the initial notice. Nothing

in the FCRA, however, requires identical content in the initial and

renewal notices. Moreover, the FCRA requires the Commission to provide

specific guidance to ensure that opt-out notices are clear, conspicuous

and concise. The Commission believes that it is unreasonable to expect

consumers, upon receipt of a renewal notice, to remember that they

previously opted out five years ago (or longer) or, even if they do

remember, to know that they must opt out again in order to renew their

opt-out election. Therefore, to ensure that the renewal notice is

meaningful, the Commission is proposing that the renewal notice must

remind the consumer he or she must opt out again to renew the opt-out

election and continue to limit the solicitations from covered

affiliates. In addition, proposed paragraph (b) requires that the

notice must accurately disclose the same items required to be disclosed

in the initial opt-out notice under proposed section 162.5(a), along

with a statement explaining that the consumer's prior opt-out election

has expired or is about to expire, as applicable, and that if the

consumer wishes to keep the consumer's opt-out election in force, the

consumer must opt out again.

Proposed paragraph (c) addresses the timing of the renewal notice

and provides that a renewal notice can be given to the consumer either

a reasonable period of time before the expiration of the opt-out

period, or any time after the expiration of the opt-out period but

before solicitations that would have been prohibited by the expired

opt-out election are made to the consumer. Providing the renewal notice

to a consumer within a reasonable period of time before the expiration

of the opt-out period is appropriate to facilitate the smooth

transition of consumers that choose to change their election. A renewal

notice given too far in advance of the expiration of the opt-out

period, however, may be confusing to consumers. The Commission does not

propose to set a fixed time for what would constitute a reasonable

period of time before the expiration of the opt-out period to send a

renewal notice, because a reasonable period of time may depend upon the

amount of time afforded to the consumer for a reasonable opportunity to

opt out, the amount of time necessary to process opt outs, and other

factors. Nevertheless, providing a renewal notice on or with the last

annual privacy notice required by the GLB Act privacy provisions sent

to the consumer before the expiration of the opt-out period shall be

deemed reasonable in all cases.

Proposed paragraph (d) clarifies that sending a renewal notice to

the consumer before the expiration of the opt-out period does not

shorten the five-

[[Page 66029]]

year opt-out period, even if the consumer does not renew the opt-out

election.

B. Disposal Rules

As noted above, section 1088 of the Dodd-Frank Act also amends

section 628 of the FCRA, which directs the Commission to adopt

comparable and consistent rules with the Agencies regarding the

disposal of sensitive consumer report information. The purpose of these

rules is to reduce the risk of identity theft and other consumer harm

from improper disposal of a consumer report or any record derived from

one. The proposed disposal rules apply to any CFTC registrant that, for

a business purpose, maintains or otherwise possesses such consumer

report information.

The general disposal requirement provides that CFTC registrants

covered by the proposed regulation ``take reasonable measures to

protect against unauthorized access to or use of the information in

connection with its disposal.'' The standard for disposal is flexible

to allow CFTC registrants to determine what measures are reasonable

based on the sensitivity of the information, the costs and benefits of

different disposal methods, and relevant changes in technology over

time. The proposed disposal rule's flexibility should also facilitate

compliance for smaller CFTC registrants.

In the discussion that follows, the Commission solicits comment on

specific aspects of the proposed disposal rules on a section-by-section

basis.

Section 162.2--Definitions

In addition to the definitions previously discussed above, the

proposed regulations to implement section 628 of the FCRA require the

addition of the following terms to the definition section of the new

Part 162.

Consumer Information

Proposed paragraph (h) defines the term ``consumer information'' to

mean any record about an individual, whether in paper, electronic, or

other form that is a consumer report or is derived from a consumer

report.\14\ Consumer information also means a compilation of such

records. Consumer information does not include information that does

not identify individuals, such as aggregate information or blind data.

The Commission believes that a broad definition of the term, which

includes all types of records that are consumer reports, or contain

consumer information derived from consumer reports, will best

effectuate the purposes of the FCRA. However, under this definition,

information which does not identify a particular consumer would not be

included. The Commission believes that limiting the definition to

information which identifies particular consumers is consistent with

the purpose of the FCRA.

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\14\ The term ``consumer report'' is defined in section

603(d)(1) of the FCRA as ``any written, oral, or other communication

of any information by a consumer reporting agency bearing on a

consumer's credit worthiness, credit standing, credit capacity,

character, general reputation, personal characteristics, or mode of

living which is used or expected to be used or collected in whole or

in part for the purpose of serving as a factor in establishing the

consumer's eligibility for [several purposes, including employment,

the provision of credit or insurance].''

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Dispose or Disposal

Proposed paragraph (i) defines the terms ``dispose'' or

``disposal'' to mean the discarding or abandonment of consumer

information or the sale, donation, or transfer of any medium, including

computer equipment, upon which consumer information is stored. The

sale, donation, or transfer of consumer information would not be

considered ``disposal'' under the proposed regulation. For example, an

entity subject to the proposed disposal rule that transfers consumer

information to a third party for marketing purposes would not be

discarding the information for the purposes of the proposed disposal

rule. If the entity donates computer equipment on which consumer

information is stored, however, the donation would be considered a

disposal under the proposed disposal rule. The Commission requests

comments on this definition.

Section 162.21--Disposal Rules

Proposed section 162.21 implements section 628(a)(1) of the FCRA.

Proposed paragraph (a) would require any covered affiliate to adopt

must adopt reasonable, written policies and procedures that address

administrative, technical, and physical safeguards for the protection

of consumer information. The proposal requires these written policies

and procedures to be reasonably designed to: (1) Insure the security

and confidentiality of consumer information; (2) protect against any

anticipated threats or hazards to the security or integrity of consumer

information; and (3) protect against unauthorized access to or use of

consumer information that could result in substantial harm or

inconvenience to any consumer.

Proposed paragraph (b) would require that any person that maintains

or otherwise possesses consumer information to take ``reasonable

measures to protect against unauthorized access to or use of the

information in connection with its disposal.'' The Commission

recognizes that there are few foolproof methods of record destruction.

Therefore, the proposed regulation does not require persons subject to

the rule to ensure perfect destruction of consumer information in every

instance; rather, it requires covered entities to take reasonable

measures to protect against unauthorized access to or use of the

information in connection with its disposal.

In determining what measures are ``reasonable'' under this subpart,

the Commission expects that entities within the scope of the proposed

regulation would consider the sensitivity of the consumer information,

the nature and size of the entity's operations, the costs and benefits

of different disposal methods, and relevant technological changes.

``Reasonable measures'' are very likely to require elements such as the

establishment of policies and procedures governing disposal, as well as

appropriate employee training.

The flexible standard for disposal in the proposed rule would allow

persons subject to the rule to make decisions appropriate to their

particular circumstances and should minimize the disruption of existing

practices to the extent that they already provide appropriate

protections for consumers. It is also intended to minimize the burden

of compliance for smaller entities.

Despite the benefits of a flexible ``reasonableness'' standard, the

Commission recognizes that such a standard could leave entities within

the scope of the proposed regulations with some uncertainty about

compliance. While each entity would have to evaluate what is

appropriate for its size and the complexity of its operations, proposed

paragraph (c) sets forth the following examples of what the Commission

believes constitute ``reasonable'' disposal measures for purposes of

the proposed regulation:

Implementing and monitoring compliance with policies and

procedures that require the burning, pulverizing, or shredding of

papers containing consumer information so that the information cannot

practicably be read or reconstructed;

Implementing and monitoring compliance with policies and

procedures that require the destruction or erasure of electronic media

containing consumer information so

[[Page 66030]]

that the information cannot practically be read or reconstructed; and

After due diligence, entering into and monitoring

compliance with a written contract with another party engaged in the

business of record destruction to dispose of consumer information in a

manner that is consistent with this rule.

The Commission invites comment on the proposed standard for

disposal. In particular, the Commission seeks comment on whether the

proposed ``reasonableness'' standard provides sufficient guidance to

CFTC registrants. The Commission also seeks comment on whether the

proposed disposal rule should include alternative standards, specify

particular disposal methods, or should provide examples, and what those

examples should be.

Proposed paragraph (d) makes clear that nothing in the proposed

disposal rule is intended to create a requirement that a covered entity

maintain or destroy any record pertaining to an individual. The rule

also is not intended to affect any requirement imposed under any other

provision of law to maintain or destroy such records, particularly the

record keeping requirements located in Part 1 of the Commission's

Regulations.

C. Effective Date

Pursuant to section 1100H of the Dodd-Frank Act, the Commission

proposes to make the proposed regulations--the affiliate marketing

rules and the disposal rules--become effective on the ``designated

transfer date'' of authority from various Federal agencies to the

Bureau. Section 1062 of the Dodd-Frank Act provides that the

``designated transfer date'' is a date designated in the Federal

Register no later than 60 days after the enactment of the Dodd-Frank

Act by the Secretary of the Treasury, the Chairman of the Board of

Governors, the Chairman of the Federal Trade Commission, and several

other Federal agencies.\15\ On September 20, 2010, these Federal

agencies issued a notice designating July 21, 2011 as the designated

transfer date.\16\ As a result, the Commission proposes to adopt the

affiliate marketing rules and the disposal rules on that date.

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\15\ The heads of the other Federal agencies are: The

Comptroller of the Currency; the Director of the Office of Thrift

Supervision; the Secretary of the Department of Housing and Urban

Development; the Director of the Office of Management and Budget;

the Chairman of the National Credit Union Administration Board; and

the Chairperson of the Corporation.

\16\ See 75 FR 57252-02 (Sept. 20, 2010).

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III. Cost-Benefit Analysis

Section 15(a) of the CEA \17\ requires the Commission to consider

the costs and benefits of its actions before issuing an order under the

CEA. By its terms, section 15(a) does not require the Commission to

quantify the costs and benefits of an order or to determine whether the

benefits of the order outweigh its costs; rather, it requires that the

Commission ``consider'' the costs and benefits of its actions. Section

15(a) further specifies that the costs and benefits shall be evaluated

in light of five broad areas of market and public concern: (1)

Protection of market participants and the public; (2) efficiency,

competitiveness and financial integrity of futures markets; (3) price

discovery; (4) sound risk management practices; and (5) other public

interest considerations. The Commission may in its discretion give

greater weight to any one of the five enumerated areas and could in its

discretion determine that, notwithstanding its costs, a particular

order is necessary or appropriate to protect the public interest or to

effectuate any of the provisions or accomplish any of the purposes of

the CEA.

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\17\ 7 U.S.C. 19(a).

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The proposed regulations would implement new statutory provisions

enacted by Title X of the Dodd-Frank Act. These proposed regulations

would require CFTC registrants to do two things with respect to certain

consumer information. First, the proposed regulations would require

CFTC registrants to provide consumers with the opportunity to prohibit

affiliates from using certain information to make marketing

solicitations to consumers. Second, the proposed rules would require

CFTC registrants that possess or maintain consumer report information

in connection with their business activities to develop and implement a

written program for the proper disposal of such information.

With respect to costs, the Commission has determined that costs to

market participants would be de minimis because: (1) The Commission is

providing model notices in the proposed regulations in order to assist

these participants in complying with the affiliate marketing rules; (2)

the affiliate marketing rules only require periodic notice (i.e., at a

maximum, companies would have to provide notice to a consumer once

every five years; at a minimum, companies would have to provide notice

only once per consumer); (3) market participants can file consolidated

and equivalent notices in order to comply with the affiliate marketing

rules; and (4) the disposal rules were designed to provide market

participants with the greatest flexibility in the development and

implementation of a disposal program (which may vary according to a

company's size and the complexity of its operations, the costs and

benefits of available disposal methods, and the sensitivity of

information involved). The Commission also has determined that the

costs to the general public are: (1) Absent the implementation of the

affiliate marketing rules, consumers would have no control over both

the use of their personal information, and the number of solicitations

such consumers would receive from affiliates of company with which they

have a pre-existing business relationship; and (2) absent the

implementation of the disposal rules, would increase the chances that

consumer information would be accessible to third parties who may use

such information for identity theft or other unlawful purposes.

With respect to benefits, the Commission has determined that,

through the implementation of the affiliate marketing rules, consumers

generally will be able to opt out of receiving unsolicited and targeted

materials from businesses with which the consumers have no pre-existing

business relationship. In addition, the Commission has determined that,

as a result of the implementation of the disposal rules, the potential

for the misuse of consumer information will greatly decrease.

The Commission invites public comment on its cost-benefit

considerations. Commenters are also are invited to submit any data or

other information that they may have quantifying or qualifying the

costs and benefits of the proposed regulations with their comment

letters.

IV. Paperwork Reduction Act

Provisions of proposed Part 162 would result in new collection of

information requirements within the meaning of the Paperwork Reduction

Act of 1995 (``PRA''). The Commission therefore is submitting this

proposal to the Office of Management and Budget (``OMB'') for review in

accordance with 44 U.S.C. 3507(d) and 5 CFR 1320.11. The title for this

collection of information is ``Part 162--Protection of Consumer

Information Under the Fair Credit Reporting Act.'' If adopted,

responses to this new collection of information would be mandatory. The

Commission will protect proprietary information according to the

Freedom of

[[Page 66031]]

Information Act and 17 CFR part 145, ``Commission Records and

Information.'' In addition, section 8(a)(1) of the CEA strictly

prohibits the Commission, unless specifically authorized by the CEA,

from making public ``data and information that would separately

disclose the business transactions or market positions of any person

and trade secrets or names of customers.'' The Commission also is

required to protect certain information contained in a government

system of records according to the Privacy Act of 1974, 5 U.S.C. 552a.

1. Information Provided by Reporting Entities/Persons

Under proposed Part 162, reporting or recordkeeping CFTC

registrants, which presently would include approximately 3,172 persons

(including an estimate of the number of new CFTC registrants pursuant

to Title VII of the Dodd-Frank Act),\18\ would be required to collect

information and keep records for the purposes of providing opt-out

notices to consumers at a maximum of at least every five years. The

proposed collection for the affiliate marketing rules is estimated to

involve 0.01 burden hours per report or record. The estimated number of

opt-out notices per five-year period is 412,000. The estimated

aggregate number of burden hours each five-year period is 13,068.64

burden hours for the affiliate marketing rules.

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\18\ See the National Futures Association's (``NFA'') Internet

Web site at: http://www.nfa.futures.org/NFA-registration/NFA-

membership-and-dues.HTML for the most up-to-date number of CFTC

registrants. For the purposes of the PRA calculation, Commission

staff used the number of registered futures commission merchants,

commodity trading advisors, commodity pool operators and introducing

brokers on the NFA's Web site as of August 31, 2010.

Commission staff estimated the number of swap dealers and major

swap participants, which staff believes will register with the

Commission following the issuance of final rules under the Dodd-

Frank Act further defining the terms ``swap dealers'' and ``major

swap participants'' and setting forth a registration regime for

these entities. While staff believes that there may likely be

approximately 200 swap dealers, we have taken a conservative

approach in estimating that there will be 250 swap dealers for

Paperwork Reduction Act purposes.

Some of the entities that were registered as futures commission

merchants as of August 31, 2010 will soon register as retail foreign

exchange dealers. Consequently, the total number of CFTC registrants

will not be affected as a result of the change in registration from

future commission merchants to retail foreign exchange dealers.

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The same number of persons would be required to develop written

disposal plans only once. The proposed collection for the disposal

rules is estimated to involve between three to 10 burden hours per

plan, at an average of 3.5 burden hours, for an aggregate of 11,102

burden hours.

2. Information Collection Comments

The Commission invites the public and other Federal agencies to

comment on any aspect of the reporting and recordkeeping burdens

discussed above. Pursuant to 44 U.S.C. 3506(c)(2)(B), the Commission

solicits comments in order to: (i) Evaluate whether the proposed

collection of information is necessary for the proper performance of

the functions of the Commission, including whether the information will

have practical utility; (ii) evaluate the accuracy of the Commission's

estimate of the burden of the proposed collection of information; (iii)

determine whether there are ways to enhance the quality, utility, and

clarity of the information to be collected; and (iv) minimize the

burden of the collection of information on those who are to respond,

including through the use of automated collection techniques or other

forms of information technology.

Comments may be submitted directly to the Office of Information and

Regulatory Affairs, by fax at (202) 395-6566 or by e-mail at

[email protected] Please provide the Commission with a copy

of submitted comments so that all comments can be summarized and

addressed in the final rule preamble. Refer to the ADDRESSES section of

this notice of proposed rulemaking for comment submission instructions

to the Commission. A copy of the supporting statements for the

collections of information discussed above may be obtained by visiting

RegInfo.gov. OMB is required to make a decision concerning the

collection of information between 30 and 60 days after publication of

this release. Consequently, a comment to OMB is most assured of being

fully effective if received by OMB (and the Commission) within 30 days

after publication of this notice of proposed rulemaking.

V. Regulatory Flexibility Act

The Regulatory Flexibility Act (``RFA'') \19\ requires that

agencies consider whether the regulations they propose will have a

significant economic impact on a substantial number of small entities

and, if so, provide a regulatory flexibility analysis respecting the

impact.\20\ The regulations proposed by the Commission shall affect

only futures commission merchants, introducing brokers, commodity

trading advisors, commodity pool operators, swap dealers and major swap

participants. The Commission has determined that the notice obligations

under this proposed regulation will not create a significant economic

impact on a substantial number of small entities. Moreover, the

Commission previously has determined that futures commission merchants

and commodity pool operators are not small entities for purposes of the

RFA.\21\ Accordingly, the Chairman, on behalf of the Commission, hereby

certifies pursuant to 5 U.S.C. 605(b) that the proposed rules, will not

have a significant impact on a substantial number of small entities.

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\19\ 5 U.S.C. 601 et seq.

\20\ 5 U.S.C. 601 et seq.

\21\ Previous determinations for FCMs at 47 FR 18618, 18619

(1982) and CPOs at 47 FR 18618, 18619 (1982).

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VI. Text of Proposed Rules

List of Subjects in 17 CFR Part 162

Consumer protection, Privacy.

For the reasons stated in the preamble, the Commodity Futures

Trading Commission proposes to add 17 CFR part 162 to read as follows:

PART 162--PROTECTION OF CONSUMER INFORMATION UNDER THE FAIR CREDIT

REPORTING ACT

Sec.

162.1 Purpose and scope.

162.2 Definitions.

Subpart A--Business Affiliate Marketing Rules

162.3 Affiliate marketing opt out and exceptions.

162.4 Scope and duration of opt out.

162.5 Contents of opt-out notice; consolidated and equivalent

notices.

162.6 Reasonable opportunity to opt out.

162.7 Reasonable and simple methods of opting out.

162.8 Delivery of opt-out notices

162.9 Renewal of opt out.

162.10-162.20 [Reserved]

Subpart B--Disposal Rules

162.21 Proper disposal of consumer information.

Authority: Sec. 1088, Pub. L. 111-203; 124 Stat. 1376 (2010).

Sec. 162.1 Purpose and scope.

(a) Purpose. The purpose of this part is to implement various

provisions in the Fair Credit Reporting Act, 15 U.S.C. 1681, et seq.

(``FCRA''), which provide certain protections to consumer information.

(b) Scope. This part applies to certain consumer information held

by the entities listed below. This part shall apply to futures

commission merchants, retail foreign exchange dealers, commodity

trading advisors, commodity pool operators, introducing brokers,

[[Page 66032]]

swap dealers and major swap participants, regardless of whether they

are required to register with the Commission. This part does not apply

to foreign futures commission merchants, foreign retail foreign

exchange dealers, commodity trading advisors, commodity pool operators,

introducing brokers, swap dealers and major swap participants unless

such entity registers with the Commission. Nothing in this part

modifies limits or supersedes the requirements set forth in Part 160 of

this title.

(c) Examples. The examples in this part are not exclusive.

Compliance with an example, to the extent applicable, constitutes

compliance with this part. Examples in a section illustrate only the

issue described in the section and do not illustrate any other issue

that may arise in this part.

Sec. 162.2 Definitions.

(a) Affiliate. The term ``affiliate'' of a means any company that

is under common ownership or common corporate control with a covered

affiliate.

(b) Clear and conspicuous. The term ``clear and conspicuous'' means

reasonably understandable and designed to call attention to the nature

and significance of the information presented in the notice.

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

ownership or common corporate control'' means the power to exercise a

controlling influence over the management or policies of a company

whether through ownership of securities, by contract, or otherwise. Any

person who owns beneficially, either directly or through one or more

controlled companies, more than 25 percent of the voting securities of

any company is presumed to control the company. Any person who does not

own more than 25 percent of the voting securities of a company will be

presumed not to control the company.

(d) Company. The term ``company'' means any corporation, limited

liability company, business trust, general or limited partnership,

association, or similar organization.

(e) Concise.--

(1) In general. The term ``concise'' means a reasonably brief

expression or statement.

(2) Combination with other required disclosures. A notice required

by this part may be concise even if it is combined with other

disclosures required or authorized by Federal or state law.

(f) Consumer. The term ``consumer'' means an individual person.

(g) Consumer information. The term ``consumer information'' means

any record about an individual, whether in paper, electronic, or other

form, that is a consumer report or is derived from a consumer report.

Consumer information also means a compilation of such records. Consumer

information does not include information that does not identify

individuals, such as aggregate information or blind data.

(h) Covered affiliate. The term ``covered affiliate'' means a

futures commission merchant, retail foreign exchange dealer, commodity

trading advisor, commodity pool operator, introducing broker, swap

dealer or major swap participant, which is subject to the jurisdiction

of the Commission.

(i) Dispose or Disposal.--

(1) In general. The terms ``dispose'' or ``disposal'' means:

(i) The discarding or abandonment of consumer information; or

(ii) The sale, donation, or transfer of any medium, including

computer equipment, upon which consumer information is stored.

(2) Sale, donation, or transfer of consumer information. The sale,

donation, or transfer of consumer information is not considered

disposal for the purposes of subpart B.

(j) Dodd-Frank Act. The term ``Dodd-Frank Act'' means the Dodd-

Frank Wall Street Reform and Consumer Protection Act (Pub. L. 111-203,

124 Stat. 1376 (2010)).

(k) Eligibility information. The term ``eligibility information''

means any information that would be a consumer report if the exclusions

from the definition of ``consumer report'' in section 603(d)(2)(A) of

the FCRA did not apply. Examples of the type of information that would

fall within the definition of eligibility information includes an

affiliate's own transaction or experience information, such as

information about a consumer's account history with that affiliate, and

other information, such as information from credit bureau reports or

applications. Eligibility information does not include aggregate or

blind data that does not contain personal identifiers such as account

numbers, names, or addresses.

(l) FCRA. The term ``FCRA'' means the Fair Credit Reporting Act (15

U.S.C. 1681 et seq.).

(m) Financial product or service. The term ``financial product or

service'' means any product or service that a futures commission

merchant, retail foreign exchange dealer, commodity trading advisor,

commodity pool operator, introducing broker, major swap participant or

swap dealer could offer that is subject to the Commission's

jurisdiction.

(n) GLB Act. The term ``GLB Act'' means the Gramm-Leach-Bliley Act

(Pub. L. No. 106-102, 113 Stat. 1338 (1999)).

(o) Major swap participant. The term ``major swap participant'' has

the same meaning as in section 1a(33) of the Commodity Exchange Act, 7

U.S.C. 1 et seq., as may be further defined by this title, and includes

any person registered as such thereunder.

(p) Person. The term ``person'' means any individual, partnership,

corporation, trust, estate, cooperative, association, or other entity.

(q) Pre-existing business relationship. The term ``pre-existing

business relationship'' means a relationship between a person, or a

person's licensed agent, and a consumer based on--

(1) A financial contract between the person and the consumer which

is in force on the date on which the consumer is sent a solicitation by

this part;

(2) The purchase, rental, or lease by the consumer of a persons'

services or a financial transaction (including holding an active

account or policy in force or having another continuing relationship)

between the consumer and the person, during the 18-month period

immediately preceding the date on which the consumer is sent a

solicitation covered by this part; or

(3) An inquiry or application by the consumer regarding a financial

product or service offered by that person during the three-month period

immediately preceding the date on which the consumer is sent a

solicitation covered by this part.

(r) Solicitation--(1) In general. The term ``solicitation'' means

the marketing of a financial product or service initiated by an

affiliate to a particular consumer that is--

(i) Based on eligibility information communicated to that covered

affiliate by an affiliate that has or previously had the pre-existing

business relationship with a consumer as described in this part; and

(ii) Intended to encourage the consumer to purchase or obtain such

financial product or service.

A solicitation does not include marketing communications that are

directed at the general public.

(2) Examples. Examples of what communications constitute a

solicitation include communications such as a telemarketing

solicitation, direct mail, or e-mail, when those communications are

directed to a specific consumer based on eligibility information. A

solicitation does not

[[Page 66033]]

include communications that are directed at the general public without

regard to eligibility information, even if those communications are

intended to encourage consumers to purchase financial products and

services from the affiliate initiating the communications.

(s) Swap dealer. The term ``swap dealer'' has the same meaning as

in section 1a(49) of the Commodity Exchange Act, 7 U.S.C. 1 et seq., as

may be further defined by this title, and includes any person

registered as such thereunder.

Subpart A--Business Affiliate Marketing Rules

Sec. 162.3 Affiliate marketing opt out and exceptions.

(a) Initial notice and opt out. A covered affiliate may not use

eligibility information about a consumer that the covered affiliate

receives from an affiliate with the consumer to make a solicitation for

marketing purposes to such consumer unless--

(1) It is clearly and conspicuously disclosed to the consumer in

writing or if the consumer agrees, electronically, in a concise notice

that the person may use shared eligibility information about that

consumer received from an affiliate to make solicitations for marketing

purposes to such consumer;

(2) The consumer is provided a reasonable opportunity and a

reasonable and simple method to opt out, or prohibit the covered

affiliate from using eligibility information to make solicitations for

market purposes to the consumer; and

(3) The consumer has not opted out.

(b) Persons responsible for satisfying the notice requirement. The

notice required by this section must be provided:

(1) By an affiliate that has or previously had a pre-existing

business relationship with a consumer; or

(2) As part of a joint notice from two or more members of an

affiliated group of companies, provided that at least one of the

affiliates on the joint notice has or previously had a pre-existing

business relationship with the consumer.

(c) Exceptions. These proposed regulations would not apply to the

following covered affiliate:

(1) A covered affiliate that has a pre-existing business

relationship with a consumer;

(2) Communications between an employer and employee-consumer (or

his or her beneficiary) in connection with an employee benefit plan;

(3) A covered affiliate that is currently providing services to the

consumer;

(4) If the consumer initiated the communication with the covered

affiliate by oral, electronic, or written means;

(5) If the consumer authorized or requested the covered affiliate's

solicitation; or

(6) If compliance by a person with these regulations would prevent

that person's compliance with state insurance laws pertaining to unfair

discrimination.

(d) Making solicitations.

(1) When a solicitation occurs. A covered affiliate makes a

solicitation for marketing purposes if the person--

(i) Receives eligibility information from an affiliate;

(ii) Uses that eligibility information to do one or more of the

following:

(A) Identify the consumer or type of consumer to receive a

solicitation;

(B) Establish criteria used to select the consumer to receive a

solicitation about the covered affiliate's financial products or

services; or

(C) Decide which of the services or contracts to market to the

consumer or tailor the solicitation to that consumer; and

(iii) As a result of the covered affiliate's use of the eligibility

information, the consumer is provided a solicitation.

(2) Receipt of eligibility information. A covered affiliate may

receive eligibility information from an affiliate in various ways,

including when the affiliate places that information into a common

database that the covered affiliate may access.

(3) Service Providers. Except as provided in paragraph (d)(5) of

this section, a covered affiliate receives or uses an affiliate's

eligibility information if a service provider acting on the covered

affiliate's behalf (regardless of whether such service provider is a

third party or an affiliate of the covered affiliate) receives or uses

that information in the manner described in paragraph (d)(1)(i) or

(d)(1)(ii) of this section. All relevant facts and circumstances will

determine whether a service provider is acting on behalf of a covered

affiliate when it receives or uses an affiliate's eligibility

information in connection with marketing the covered affiliate's

financial products or services.

(4) Use by an affiliate of its own eligibility information. Unless

a covered affiliate uses eligibility information that the covered

affiliate receives from an affiliate in the manner described in

paragraph (d)(2) of this section, the covered affiliate does not make a

solicitation subject to this subpart:

(i) Uses its own eligibility information that it obtained in

connection with a pre-existing business relationship it has or

previously had with the consumer to market the covered affiliate's

financial products or services to the consumer; or

(ii) Directs its service provider to use the affiliate's own

eligibility information that it obtained in connection with a pre-

existing business relationship it has or previously had with the

consumer to market the covered affiliate's financial products or

services to the consumer, and the covered affiliate does not

communicate directly with the service provider regarding that use.

(5) Use of eligibility information by a service provider--(i) In

general. A covered affiliate does not make a solicitation subject to

this subpart if a service provider (including an affiliated or third-

party service provider that maintains or accesses a common database

that the covered affiliate may access) receives eligibility information

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

relationship with the consumer and uses that eligibility information to

market the covered affiliate's financial products or services to the

consumer, so long as--

(A) The affiliate controls access to and use of its eligibility

information by the service provider (including the right to establish

the specific terms and conditions under which the service provider may

use such information to market the covered affiliate's financial

products or services);

(B) The affiliate establishes specific terms and conditions under

which the service provider may access and use such affiliate's

eligibility information to market the covered affiliate's financial

products and services (or those of affiliates generally) to the

consumer, such as the identity of the affiliated companies whose

financial products or services may be marketed to the consumer by the

service provider, the types of financial products or services of

affiliated companies that may be marketed, and the number of times the

consumer may receive marketing materials, and periodically evaluates

the service provider's compliance with those terms and conditions;

(C) The affiliate requires the service provider to implement

reasonable policies and procedures designed to ensure that the service

provider uses such affiliate's eligibility information in accordance

with the terms and conditions established by such affiliate relating to

the marketing of the covered affiliate's financial products or

services;

(D) The affiliate is identified on or with the marketing materials

provided to the consumer; and

(E) The covered affiliate does not directly use its affiliate's

eligibility

[[Page 66034]]

information in the manner described in paragraph (b)(1)(ii) of this

section.

(ii) Writing requirements. (A) The requirements of paragraphs

(b)(5)(i)(A) and (C) of this section must be set forth in a written

agreement between the affiliate that has or previously had a pre-

existing business relationship with the consumer and the service

provider; and

(B) The specific terms and conditions established by the affiliate

as provided in paragraph (b)(5)(i)(B) of this section must be set forth

in writing.

(e) Relation to affiliate-sharing notice and opt out. Nothing in

this rulemaking will limit the responsibility of a covered affiliate to

comply with the notice and opt-out provisions under other privacy rules

under the FCRA, the GLB Act or the CEA.

Sec. 162.4 Scope and duration of opt out.

(a) Scope of opt-out election--(1) In general. The consumer's

election to opt out prohibits any covered affiliate subject to the

scope of the opt-out notice from using eligibility information received

from another affiliate to make solicitations to the consumer.

(2) Continuing relationship--(i) In general. If the consumer

establishes a continuing relationship with a covered affiliate or its

affiliate, an opt-out notice may apply to eligibility information

obtained in connection with--

(A) A single continuing relationship or multiple continuing

relationships that the consumer establishes with a covered affiliate or

its affiliates, including continuing relationships established

subsequent to delivery of the opt-out notice, so long as the notice

adequately describes the continuing relationships covered by the opt

out; or

(B) Any other transaction between the consumer and the covered

affiliate or its affiliates as described in the notice.

(ii) Examples of a continuing relationship. A consumer has a

continuing relationship with a covered affiliate or its affiliate if:

(A) The covered affiliate is a futures commission merchant through

whom a consumer has opened an account, or that carries the consumer's

account on a fully-disclosed basis, or that effects or engages in

commodity interest transactions with or for a consumer, even if the

covered affiliate does not hold any assets of the consumer;

(B) The covered affiliate is an introducing broker that solicits or

accepts specific orders for trades;

(C) The covered affiliate is a commodity trading advisor with whom

a consumer has a contract or subscription, either written or oral,

regardless of whether the advice is standardized, or is based on, or

tailored to, the commodity interest or cash market positions or other

circumstances or characteristics of the particular consumer;

(D) The covered affiliate is a commodity pool operator, and accepts

or receives from the consumer, funds, securities, or property for the

purpose of purchasing an interest in a commodity pool;

(E) The covered affiliate holds securities or other assets as

collateral for a loan made to the consumer, even if the covered

affiliate did not make the loan or do not affect any transactions on

behalf of the consumer; or

(F) The covered affiliate regularly effects or engages in commodity

interest transactions with or for a consumer even if the covered

affiliate does not hold any assets of the consumer.

(3) No continuing relationship--(i) In general. If there is no

continuing relationship between a consumer and the covered affiliate or

its affiliate, and the covered affiliate or its affiliate obtain

eligibility information about a consumer in connection with a

transaction with the consumer, such as an isolated transaction or a

credit application that is denied, an opt-out notice provided to the

consumer only applies to eligibility information obtained in connection

with that transaction.

(ii) Examples of no continuing relationship. A consumer does not

have a continuing relationship with a covered affiliate or its

affiliate if:

(A) The covered affiliate has acted solely as a ``finder'' for a

futures commission merchant, and the covered affiliate does not solicit

or accept specific orders for trades; or

(B) The covered affiliate has solicited the consumer to participate

in a pool or to direct his or her account and he or she has not

provided the covered affiliate with funds to participate in a pool or

entered into any agreement with the covered affiliate to direct his or

her account.

(4) Menu of alternatives. A consumer may be given the opportunity

to choose from a menu of alternatives when electing to prohibit

solicitations, such as by electing to prohibit solicitations from

certain types of affiliates covered by the opt-out notice but not other

types of affiliates covered by the notice, electing to prohibit

solicitations based on certain types of eligibility information but not

other types of eligibility information, or electing to prohibit

solicitations by certain methods of delivery but not other methods of

delivery. However, one of the alternatives must allow the consumer to

prohibit all solicitations from all of the affiliates that are covered

by the notice.

(5) Special rule for a notice following termination of all

continuing relationships. A consumer must be given a new opt-out notice

if, after all continuing relationships with the covered affiliate or

its affiliate(s) are terminated, the consumer subsequently establishes

another continuing relationship with the covered affiliate or its

affiliate(s) and the consumer's eligibility information is to be used

to make a solicitation. The new opt-out notice must apply, at a

minimum, to eligibility information obtained in connection with the new

continuing relationship. Consistent with paragraph b of this section,

the consumer's decision not to opt out after receiving the new opt-out

notice would not override a prior opt-out election by the consumer that

applies to eligibility information obtained in connection with a

terminated relationship, regardless of whether the new opt-out notice

applies to eligibility information obtained in connection with the

terminated relationship.

(b) Duration of opt-out election. An opt-out election must be

effective for a period of at least five years beginning when the

consumer's opt-out election is received and implemented, unless the

consumer subsequently revokes the opt-out election in writing or, if

the consumer agrees, electronically. An opt-out election may be

established for a period of more than five years or for an indefinite

period unless revoked.

(c) Time period in which a consumer can opt out. A consumer may opt

out at any time.

(d) No effect on opt-out period. An opt-out period may not be

shortened by sending a renewal notice to the consumer before expiration

of the opt-out period, even if the consumer does not renew the opt out.

Sec. 162.5 Contents of opt-out notice; consolidated and equivalent

notices.

(a) Contents of the opt-out notice-- (1) In general. An opt-out

notice must be in writing, be clear and conspicuous, as well as

concise, and must accurately disclose the following:

(i)(A) The name of the affiliate that has or previously had a pre-

existing business relationship with a consumer, which is providing the

notice; or

(B) If jointly provided jointly by multiple affiliates and each

affiliate shares a common name, then the notice may indicate that it is

being provided by multiple companies with the same name or multiple

companies in the same group or family of companies. If the affiliates

providing the notice do not share a common name, then the notice must

either separately identify each

[[Page 66035]]

affiliate by name or identify each of the common names used by those

affiliates;

(ii) The list of affiliates or types of affiliates whose use of

eligibility information is covered by the notice, which may include

companies that become affiliates after the notice is provided to the

consumer;

(iii) A general description of the types of eligibility information

that may be used to make solicitations to the consumer;

(iv) A statement that the consumer may elect to limit the use of

eligibility information to make solicitations to the consumer;

(v) A statement that the consumer's election will apply for the

specified period of time and, if applicable, that the consumer will be

allowed to renew the election once that period expires;

(vi) If the notice is provided to consumers who have previously

elected to opt out, that such consumer does not need to act again until

the consumer receives a renewal notice; and

(vii) A reasonable and simple method for the consumer to opt out.

(2) Specifying length of time period. If consumer is granted an

opt-out period longer than a five-year duration, the opt-out notice

must specify the length of the opt-out period.

(3) No revised notice for extension of opt-out period. The duration

of an opt-out period may be increased for a period longer than the

period specified in the opt-out notice without having to provide a

revised notice of the increase to the consumer.

(b) Joint relationships. (1) If two or more consumers jointly

obtain a financial product or service, a single opt-out notice may be

provided to joint consumers.

(2) Any of the joint consumers may exercise the right to opt out on

behalf of each joint consumer.

(3) The opt-out election notice must explain how an opt-out

election by a joint consumer will be treated. That is, the notice

should specify whether an opt-out election by a joint consumer will be

treated as applying to all of the associated joint consumers, or as

applying to each joint consumer separately.

(4) If the opt-out election notice provides that each joint

consumer is permitted to opt out separately, one of the joint consumers

must be permitted to opt out on behalf of all of the joint consumers

and the joint consumer must be permitted to exercise his or her

separate rights to opt out in a single response.

(5) A covered affiliate cannot require all joint consumers to opt

out before implementing any opt-out election.

(c) Alternative contents. If the consumer is afforded a broader

right to opt out of receiving marketing than is required by this

subpart, the requirements of this section may be satisfied by providing

the consumer with a clear, conspicuous, and concise notice that

accurately discloses the consumer's opt-out rights.

(d) Coordinated and consolidated consumer notices. A notice

required by this subpart may be coordinated and consolidated with any

other notice or disclosure required to be issued under any other

provision of law by the covered affiliate providing the notice,

including but not limited to notices in the FCRA or the GLB Act privacy

notices.

(e) Equivalent notices. A notice or disclosure that is equivalent

to the notice required by this part in terms of content, and that is

provided to a consumer together with a notice required by any other

provision of law, satisfies the requirements of this section.

(f) Model notices. Model notices are provided in Appendix A of this

part. These notices were meant to facilitate compliance with this

subpart; provided, however, that nothing herein shall be interpreted to

require persons subject to this part to use the model notices.

Sec. 162.6 Reasonable opportunity to opt out.

(a) In general. A covered affiliate must not use eligibility

information about a consumer that the covered affiliate receives from

an affiliate to make a solicitation to such consumer about the covered

affiliate's financial products or services, unless the consumer is

provided a reasonable opportunity to opt out, as required by this

subpart.

(b) Examples. A reasonable opportunity to opt out under this

subpart is:

(1) If the opt-out notice is mailed to the consumer, the consumer

has 30 days from the date the notice is mailed to opt out.

(2) If the opt-out notice is sent via electronic means to the

consumer, the consumer has 30 days from the date the consumer

acknowledges receipt to elect to opt out by any reasonable method.

(3) If the opt-out notice is sent via e-mail (where the consumer

has agreed to receive disclosures by e-mail), the consumer is given 30

days after the e-mail is sent to elect to opt out by any reasonable

method.

(4) If the opt-out notice provided to the consumer at the time of

an electronic transaction, the consumer is required to decide, as a

necessary part of proceeding with the transaction, whether to opt out

before completing the transaction.

(5) If the opt-out notice is provided during an in-person

transaction, the consumer is required to decide, as a necessary part of

completing the transaction, whether to opt out through a simple

process.

(6) If the opt-out notice is provided in conjunction with other

privacy notices required by law, the consumer is allowed to exercise

the opt-out election within a reasonable period of time and in the same

manner as the opt out under that privacy notice.

Sec. 162.7 Reasonable and simple methods of opting out.

(a) In general. A covered affiliate shall be prohibited from using

eligibility information about a consumer received from an affiliate to

make a solicitation to the consumer about the covered affiliate's

financial products or services, unless the consumer is provided a

reasonable and simple method to opt out, as required by this subpart.

(b) Examples. Reasonable and simple methods of opting out include:

(1) Designating a check-off box in a prominent position on an opt-

out election form;

(2) Including a reply form and a self-addressed envelope (in a

mailing);

(3) Providing an electronic means, if the consumer agrees, that can

be electronically mailed or processed through an Internet Web site;

(4) Providing a toll-free telephone number; or

(5) Exercising an opt-out election through whatever means are

acceptable under a consolidated privacy notice required under other

laws.

(c) Specific opt-out method. Each consumer may be required to opt

out through a specific method, as long as that method is acceptable

under this subpart.

Sec. 162.8 Acceptable delivery methods of opt-out notices.

(a) In general. The opt-out notice must be provided so that each

consumer can reasonably be expected to receive actual notice.

(b) Electronic notices. For opt-out notices provided

electronically, the notice may be provided in compliance with either

the electronic disclosure provisions in Sec. 1.4 of this title or the

provisions in section 101 of the Electronic Signatures in Global and

National Commerce Act, 15 U.S.C. 7001 et seq.

Sec. 162.9 Renewal of opt out.

(a) Renewal notice and opt-out requirement--(1) In general. Since

the

[[Page 66036]]

FCRA provides that opt-out elections can expire in a period of no less

than five years, an affiliate that has or previously had a pre-existing

business relationship with a consumer must provide a renewal notice to

the consumer after such time in order to allow its affiliates to make

solicitations. After the opt-out election period expires, its

affiliates may make solicitations unless:

(i) The consumer has been given a renewal notice that complies with

the requirements of this section and Secs. 162.6 through 162.8 of this

subpart, and a reasonable opportunity and a reasonable and simple

method to renew the opt-out election, and the consumer does not renew

the opt out; or

(ii) An exception in Sec. 162.3(c) of this subpart applies.

(2) Renewal period. Each opt-out renewal must be effective for a

period of at least five years as provided in Sec. 162.4(b) of this

subpart.

(3) Affiliates who may provide the renewal notice. The notice

required by this paragraph must be provided:

(i) By the affiliate that provided the previous opt-out notice, or

its successor; or

(ii) As part of a joint renewal notice from two or more members of

an affiliated group of companies, or their successors, that jointly

provided the previous opt-out notice.

(b) Contents of renewal or extension notice. The contents of the

renewal notice must include all of the same contents of the initial

notices, but also must include:

(1) A statement that the consumer previously elected to limit the

use of certain information to make solicitations to the consumer;

(2) A statement that the consumer may elect to renew the consumer's

previous election; and

(3) If applicable, a statement that the consumer's election to

renew will apply for a specified period of time stated in the notice

and that the consumer will be allowed to renew the election once that

period expires.

(c) Timing of renewal notice. Renewal notices must be provided in a

reasonable period of time before the expiration of the opt-out election

period or any time after the expiration of the opt-out period, but

before solicitations that would have been prohibited by the expired

opt-out election are made to the consumer.

(d) No effect on opt-out period. An opt-out period may not be

shortened by sending a renewal notice to the consumer before the

expiration of the opt-out period, even if the consumer does not renew

the opt-out election.

Sec. Sec. 162.10-162.20 [Reserved]

Subpart B--Disposal Rules

Sec. 162.21 Proper disposal of consumer information.

(a) In general. Any covered affiliate must adopt must adopt

reasonable, written policies and procedures that address

administrative, technical, and physical safeguards for the protection

of consumer information. These written policies and procedures must be

reasonably designed to:

(1) Insure the security and confidentiality of consumer

information;

(2) Protect against any anticipated threats or hazards to the

security or integrity of consumer information; and

(3) Protect against unauthorized access to or use of consumer

information that could result in substantial harm or inconvenience to

any consumer.

(b) Standard. Any covered affiliate under this part who maintains

or otherwise possesses consumer information for a business purpose must

properly dispose of such information by taking reasonable measures to

protect against unauthorized access to or use of the information in

connection with its disposal pursuant to a written disposal plan.

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

measures for the purposes of this subpart--

(i) Implementing and monitoring compliance with policies and

procedures that require the burning, pulverizing, or shredding of

papers containing consumer information so that the information cannot

practicably be read or reconstructed;

(ii) Implementing and monitoring compliance with policies and

procedures that require the destruction or erasure of electronic media

containing consumer information so that the information cannot

practically be read or reconstructed; and

(iii) After due diligence, entering into and monitoring compliance

with a written contract with another party engaged in the business of

record destruction to dispose of consumer information in a manner that

is consistent with this rule.

(d) Relation to other laws. Nothing in this section shall be

construed:

(1) To require a person to maintain or destroy any record

pertaining to a consumer that is imposed under Sec. 1.31 or any other

provision of law; or

(2) To alter or affect any requirement imposed under any other

provision of law to maintain or destroy such a record.

Appendix A to Part 162--Sample Clauses

A. Although use of the model forms is not required, use of the

model forms in this Appendix (as applicable) complies with the

requirement in section 624 of the FCRA for clear, conspicuous, and

concise notices.

B. Certain changes may be made to the language or format of the

model forms without losing the protection from liability afforded by

use of the model forms. These changes may not be so extensive as to

affect the substance, clarity, or meaningful sequence of the

language in the model forms. Persons making such extensive revisions

will lose the safe harbor that this Appendix provides. Acceptable

changes include, for example:

1. Rearranging the order of the references to ``your income'',

``your account history'', and ``your credit score''.

2. Substituting other types of information for ``income'',

``account history'', or ``credit score'' for accuracy, such as

``payment history'', ``credit history'', or ``claims history''.

3. Substituting a clearer and more accurate description of the

affiliates providing or covered by the notice for phrases such as

``the [ABC] group of companies,'' including without limitation a

statement that the entity providing the notice recently purchased

the consumer's account.

4. Substituting other types of affiliates covered by the notice

for ``commodity advisor'', ``futures clearing merchant'', or ``swap

dealer'' affiliates.

5. Omitting items that are not accurate or applicable. For

example, if a person does not limit the duration of the opt-out

period, the notice may omit information about the renewal notice.

6. Adding a statement informing consumers how much time they

have to opt out before shared eligibility information may be used to

make solicitations to them.

7. Adding a statement that the consumer may exercise the right

to opt out at any time.

8. Adding the following statement, if accurate: ``If you

previously opted out, you do not need to do so again.''

9. Providing a place on the form for the consumer to fill in

identifying information, such as his or her name and address.

A-1 Model Form for Initial Opt-out notice (Single-

Affiliate Notice)

A-2 Model Form for Initial Opt-out notice (Joint

Notice)

A-3 Model Form for Renewal Notice (Single-Affiliate

Notice)

A-4 Model Form for Renewal Notice (Joint Notice)

A-5 Model Form for Voluntary ``No Marketing'' Notice

A-1 Model Form for Initial Opt-Out Notice (Single-Affiliate Notice)

[Your Choice To Limit Marketing]/[Marketing Opt Out]

--[Name of Affiliate] is providing this notice.

--[Optional: Federal law gives you the right to limit some but not

all marketing from our affiliates. Federal law also requires us to

give you this notice to tell you about your choice to limit

marketing from our affiliates.]

[[Page 66037]]

--You may limit our affiliates in the [ABC] group of companies, such

as our [commodity advisor, futures clearing merchant, and swap

dealer] affiliates, from marketing their financial products or

services to you based on your personal information that we collect

and share with them. This information includes your [income], your

[account history with us], and your [credit score].

--Your choice to limit marketing offers from our affiliates will

apply [until you tell us to change your choice]/[for x years from

when you tell us your choice]/[for at least 5 years from when you

tell us your choice]. [Include if the opt-out period expires.] Once

that period expires, you will receive a renewal notice that will

allow you to continue to limit marketing offers from our affiliates

for [another x years]/[at least another 5 years].

--[Include, if applicable, in a subsequent notice, including an

annual notice, for consumers who may have previously opted out.] If

you have already made a choice to limit marketing offers from our

affiliates, you do not need to act again until you receive the

renewal notice.

To limit marketing offers, contact us [include all that apply]:

--By telephone: 1-877--

--On the Web: www._.com

--By mail: check the box and complete the form below, and send the

form to:

--[Company name]

--[Company address]

------ Do not allow your affiliates to use my personal information

to market to me.

A-2 Model Form for Initial Opt-out Notice (Joint Notice)

[Your Choice To Limit Marketing]/[Marketing Opt Out]

--The [ABC group of companies] is providing this notice.

--[Optional: Federal law gives you the right to limit some but not

all marketing from the [ABC] companies. Federal law also requires us

to give you this notice to tell you about your choice to limit

marketing from the [ABC] companies.]

--You may limit the [ABC companies], such as the [ABC commodity

advisor, futures clearing merchant, and swap dealer] affiliates,

from marketing their financial products or services to you based on

your personal information that they receive from other [ABC]

companies. This information includes your [income], your [account

history], and your [credit score].

--Your choice to limit marketing offers from the [ABC] companies

will apply [until you tell us to change your choice]/[for x years

from when you tell us your choice]/[for at least 5 years from when

you tell us your choice]. [Include if the opt-out period expires.]

Once that period expires, you will receive a renewal notice that

will allow you to continue to limit marketing offers from the [ABC]

companies for [another x years]/[at least another 5 years].

--[Include, if applicable, in a subsequent notice, including an

annual notice, for consumers who may have previously opted out.] If

you have already made a choice to limit marketing offers from the

[ABC] companies, you do not need to act again until you receive the

renewal notice.

To limit marketing offers, contact us [include all that apply]:

By telephone: 1-877--

On the Web: www._.com

By mail: check the box and complete the form below, and send the

form to:

[Company name]

[Company address]

------Do not allow any company [in the ABC group of companies] to

use my personal information to market to me.

A-3 Model Form for Renewal Notice (Single-Affiliate Notice)

[Renewing Your Choice To Limit Marketing]/[Renewing Your Marketing Opt

Out]

--[Name of Affiliate] is providing this notice.

--[Optional: Federal law gives you the right to limit some but not

all marketing from our affiliates. Federal law also requires us to

give you this notice to tell you about your choice to limit

marketing from our affiliates.]

--You previously chose to limit our affiliates in the [ABC] group of

companies, such as our [commodity advisor, futures clearing

merchant, and swap dealer] affiliates, from marketing their

financial products or services to you based on your personal

information that we share with them. This information includes your

[income], your [account history with us], and your [credit score].

--Your choice has expired or is about to expire.

To renew your choice to limit marketing for [x] more years,

contact us [include all that apply]:

By telephone: 1-877--

On the Web: www._.com

By mail: check the box and complete the form below, and send the

form to:

[Company name]

[Company address]

------Renew my choice to limit marketing for [x] more years.

A-4 Model Form for Renewal Notice (Joint Notice)

[Renewing Your Choice To Limit Marketing]/[Renewing Your Marketing Opt

Out]

--The [ABC group of companies] is providing this notice.

--[Optional: Federal law gives you the right to limit some but not

all marketing from the [ABC] companies. Federal law also requires us

to give you this notice to tell you about your choice to limit

marketing from the [ABC] companies.]

--You previously chose to limit the [ABC companies], such as the

[ABC commodity advisor, futures clearing merchant, and swap dealer]

affiliates, from marketing their financial products or services to

you based on your personal information that they receive from other

[ABC] companies. This information includes your [income], your

[account history], and your [credit score].

--Your choice has expired or is about to expire.

To renew your choice to limit marketing for [x] more years,

contact us [include all that apply]:

By telephone: 1-877--

On the web: www._.com

By mail: check the box and complete the form below, and send the

form to:

[Company name]

[Company address]

------Renew my choice to limit marketing for [x] more years.

A-5 Model Form for Voluntary ``No Marketing'' Notice

[Your Choice To Stop Marketing]

--[Name of Affiliate] is providing this notice. You may choose to

stop all marketing from us and our affiliates.

To stop all marketing offers, contact us [include all that

apply]:

By telephone: 1-877--

On the Web: www._.com

By mail: check the box and complete the form below, and send the

form to:

[Company name]

[Company address]

------Do not market to me.

By the Commission,

Dated: October 19, 2010.

David A. Stawick,

Secretary.

Statement of Chairman Gary Gensler

Business Affiliate Marketing and Disposal of Consumer Information Rules

October 19, 2010

I support today's Commission vote on the proposed rulemaking

providing privacy protections to nonpublic, consumer information

held by entities that are subject to the jurisdiction of the

Commission. The proposed rulemaking provides customers of

Commission-regulated entities with the same privacy protections now

enjoyed by the customers of entities regulated by other Federal

agencies.

The proposal includes two important rules. The first allows

customers to prohibit Commission-regulated entities from using

certain consumer information obtained from an affiliate to make

solicitations to that customer for marketing purposes. This will be

done by means of a customer opt out. The second rule requires

Commission-regulated entities to develop and implement a written

program and procedures for the proper disposal of consumer

information. I believe that these rules will help prevent the

unauthorized use and disclosure of nonpublic, consumer information.

[FR Doc. 2010-26893 Filed 10-26-10; 8:45 am]

BILLING CODE 6351-01-P

Last Updated: October 27, 2010