Agency Information Collection Activities; Proposed Collection; Comment Request, 42806-42810 [2015-17764]

Agencies

• FEDERAL TRADE COMMISSION

[Federal Register Volume 80, Number 138 (Monday, July 20, 2015)]
[Notices]
[Pages 42806-42810]
From the Federal Register Online via the Government Publishing Office [www.gpo.gov]
[FR Doc No: 2015-17764]


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FEDERAL TRADE COMMISSION


Agency Information Collection Activities; Proposed Collection; 
Comment Request

AGENCY: Federal Trade Commission (``FTC'' or ``Commission'').

ACTION: Notice.

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SUMMARY: The FTC intends to ask the Office of Management and Budget 
(``OMB'') to extend through November 30, 2018, the current Paperwork 
Reduction Act (``PRA'') clearance for the information collection 
requirements in the FTC Red Flags, Card Issuers, and Address 
Discrepancies Rules \1\ (``Rules''). That clearance expires on November 
30, 2015.
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    \1\ 16 CFR 681.1; 16 CFR 681.2; 16 CFR part 641.

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DATES: Comments must be submitted by September 18, 2015.

ADDRESSES: Interested parties may file a comment online or on paper by 
following the instructions in the Request for Comment part of the 
SUPPLEMENTARY INFORMATION section below. Write ``Red Flags Rule, PRA 
Comment, Project No. P095406'' on your comment, and file your comment 
online at https://ftcpublic.commentworks.com/ftc/RedFlagsPRA by 
following the instructions on the web-based form. If you prefer to file 
your comment on paper, mail or deliver your comment to the following 
address: Federal Trade Commission, Office of the Secretary, 600 
Pennsylvania Avenue NW., Suite CC-5610 (Annex J), Washington, DC 20580, 
or deliver your comment to the following address: Federal Trade 
Commission, Office of the Secretary, Constitution Center, 400 7th 
Street SW., 5th Floor, Suite 5610 (Annex J), Washington, DC 20024.

FOR FURTHER INFORMATION CONTACT: Requests for additional information 
should be addressed to Steven Toporoff, Attorney, Bureau of Consumer 
Protection, (202) 326-2252, Federal Trade Commission, 600 Pennsylvania 
Avenue, Washington, DC 20580.

SUPPLEMENTARY INFORMATION: 

I. Overview of the Rules

    The Red Flags Rule requires financial institutions and certain 
creditors to develop and implement written Identity

[[Page 42807]]

Theft Prevention Programs (``Program''). The Card Issuers Rule requires 
credit and debit card issuers (``card issuers'') to assess the validity 
of notifications of address changes under certain circumstances. The 
Address Discrepancy Rule provides guidance on what users of consumer 
reports must do when they receive a notice of address discrepancy from 
a nationwide consumer reporting agency (``CRA''). Collectively, these 
three anti-identity theft provisions are intended to prevent impostures 
from misusing another person's personal information for a fraudulent 
purpose.
    The Rules implement sections 114 and 315 of the Fair Credit 
Reporting Act (``FCRA''), 15 U.S.C. 1681 et seq., to require businesses 
to undertake measures to prevent identity theft and increase the 
accuracy of consumer reports.
    Since promulgation of the original Rule, President Obama signed the 
Red Flag Program Clarification Act of 2010 (``Clarification Act''), 
which narrowed the definition of ``creditor'' for purposes of the Red 
Flags Rule. Specifically, the Clarification Act limits application of 
the Red Flags Rule to creditors that regularly and in the ordinary 
course of business: (1) Obtain or use consumer reports, directly or 
indirectly, in connection with a credit transaction; (2) furnish 
information to consumer reporting agencies in connection with a credit 
transaction; or (3) advance funds to or on behalf of a person, based on 
a person's obligation to repay the funds to or on behalf of a person, 
based on a person's obligation to repay the funds or on repayment from 
specific property pledged by or on the person's behalf. This third 
prong does not include a creditor that advances funds on behalf of a 
person for expenses incidental to a service provided by the creditor to 
that person.

II. Description of Collection of Information

A. FCRA Section 114

    The Red Flags Rule requires financial institutions and covered 
creditors to develop and implement a written Program to detect, 
prevent, and mitigate identity theft in connection with existing 
accounts or the opening of new accounts. Under the Rule, financial 
institutions and certain creditors must conduct a periodic risk 
assessment to determine if they maintain ``covered accounts.'' The Rule 
defines the term ``covered account'' as either: (1) A consumer account 
that is designed to permit multiple payments or transactions, or (2) 
any other account for which there is a reasonably foreseeable risk of 
identity theft. Each financial institution and covered creditor that 
has covered accounts must create a written Program that contains 
reasonable policies and procedures to identify relevant indicators of 
the possible existence of identity theft (``red flags''); detect red 
flags that have been incorporated into the Program; respond 
appropriately to any red flags that are detected to prevent and 
mitigate identity theft; and update the Program periodically to ensure 
it reflects change in risks to customers.
    The Red Flags Rule also requires financial institutions and covered 
creditors to: (1) Obtain approval of the initial written Program by the 
board of directors; a committee thereof or, if there is no board, an 
appropriate senior employee; (2) ensure oversight of the development, 
implementation, and administration of the Program; and (4) exercise 
appropriate and effective oversight of service provider arrangements.
    In addition, the Rules implement the section 114 requirement that 
card issuers generally must assess the validity of change of address 
notifications. Specifically, if the card issuer receives a notice of 
change of address for an existing account and, within a short period of 
time (during at least the first 30 days), receives a request for an 
additional or replacement card for the same account, the issuer must 
follow reasonable policies and procedures to assess the validity of the 
change of address.

B. FCRA Section 315

    In implementing section 315 of the FCRA, the Rules require each 
user of consumer reports to have reasonable policies and procedures in 
place to employ when the user receives a notice of address discrepancy 
from a CRA. Specifically, each user of consumer reports must develop 
reasonable policies and procedures to: (1) Enable the user to form a 
reasonable belief that a consumer report relates to the consumer about 
whom it has requested the report, when the user receives a notice of 
address discrepancy; and (2) furnish an address for the consumer that 
the user has reasonably confirmed is accurate to the CRA from which it 
receives a notice of address discrepancy, if certain conditions are 
met.

III. Burden Estimates

    Under the PRA, 44 U.S.C. 3501-3521, Federal agencies must get OMB 
approval for each collection of information they conduct or sponsor. 
``Collection of information'' includes agency requests or requirements 
to submit reports, keep records, or provide information to a third 
party. 44 U.S.C. 3502(3); 5 CFR 1320.3(c). The figures below reflect 
FTC staff's estimates of the hours burden and labor costs to complete 
the tasks described above that fall within reporting, disclosure, or 
recordkeeping requirements. FTC staff believes that the Rules impose 
negligible capital or other non-labor costs, as the affected entities 
are likely to have the necessary supplies and/or equipment already 
(e.g., offices and computers) for the information collection described 
herein.
    Overall estimated burden hours regarding sections 114 and 315, 
combined, total 2,296,863 hours and the associated estimated labor 
costs are $92,465,982. Staff assumes that affected entities will 
already have in place, independent of the Rule, equipment and supplies 
necessary to carry out the tasks necessary to comply with it.

A. FCRA Section 114

1. Estimated Hours Burden--Red Flags Rule
    As noted above, the Rule requires financial institutions and 
certain creditors with covered accounts to develop and implement a 
written Program. Under the FCRA, financial institutions over which the 
FTC has jurisdiction include state chartered credit unions and certain 
insurance companies.
    Although narrowed by the Clarification Act, the definition of 
``creditor'' still covers a broad array of entities. Moreover, the 
Clarification Act does not set forth any exemptions from Rule coverage. 
Rather, application of the Rule depends upon an entity's course of 
conduct, not its status as a particular type of business. For these 
reasons, it is difficult to determine precisely the number of creditors 
subject to the FTC's jurisdiction. There are numerous small businesses 
under the FTC's jurisdiction that may qualify as ``creditors,'' and 
there is no formal way to track them. Nonetheless, FTC staff estimates 
that the Rule's requirement to have a written Program affects 6,298 
financial institutions \2\ and 162,295 creditors.\3\
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    \2\ The total number of financial institutions is derived from 
an analysis of state credit unions and insurers within the FTC's 
jurisdiction using 2012 Census data (``County Business Patterns,'' 
U.S.) and other online industry data.
    \3\ The total number of creditors (162,295) is derived from an 
analysis of 2012 Census data and industry data for businesses or 
organizations that market goods and services to consumers or other 
businesses or organizations subject to the FTC's jurisdiction, 
reduced by entities not likely to: (1) Obtain credit reports, report 
credit transactions, or advance loans; and (2) entities not likely 
to have covered accounts under the Rule.

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[[Page 42808]]

    To estimate burden hours for the Red Flags Rule under section 114, 
FTC staff divided affected entities into two categories, based on the 
nature of their business: (1) Entities that are subject to high risk of 
identity theft and (2) entities that are subject to a low risk of 
identity theft, but have covered accounts that will require them to 
have a written Program.
a. High-Risk Entities
    FTC staff estimates that high-risk entities \4\ will each require 
25 hours to create and implement a written Program, with an annual 
recurring burden of one hour. FTC staff anticipates that these entities 
will incorporate into their Program policies and procedures that they 
likely already have in place. Further, FTC staff estimates that 
preparation for an annual report will require each high-risk entity 
four hours initially, with an annual recurring burden of one hour. 
Finally, FTC staff believes that many of the high-risk entities, as 
part of their usual and customary business practice, already take steps 
to minimize losses due to fraud, including conducting employee 
training. Accordingly, only relevant staff need be trained to implement 
the Program: For example, staff already trained as part of a covered 
entity's anti-fraud prevention efforts do not need to be re-trained as 
incrementally needed. FTC staff estimates that training connected with 
the implementation of a Program of a high-risk entity will require four 
hours, and annual training thereafter will require one hour.
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    \4\ High-risk entities include, for example, financial 
institutions within the FTC's jurisdiction and utilities, motor 
vehicle dealerships, telecommunications firms, colleges and 
universities, and hospitals.
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    Thus, estimated hours for high-risk entities are as follows:
     101,328 high-risk entities subject to the FTC's 
jurisdiction at an average annual burden of 13 hours per entity 
[average annual burden over 3-year clearance period for creation and 
implementation of a Program ((25+1+1)/3), plus average annual burden 
over 3-year clearance period for staff training ((4+1+1)/3), plus 
average annual burden over 3-year clearance period for preparing an 
annual report ((4+1+1)/3)], for a total of 1,317,264 hours.
b. Low-Risk Entities
    Entities that have a minimal risk of identity theft,\5\ but that 
have covered accounts, must develop a Program; however, they likely 
will only need a streamlined Program. FTC staff estimates that such 
entities will require one hour to create such a Program, with an annual 
recurring burden of five minutes. Training staff of low-risk entities 
to be attentive to future risks of identity theft should require no 
more than 10 minutes in an initial year, with an annual recurring 
burden of five minutes. FTC staff further estimates that these entities 
will require, initially, 10 minutes to prepare an annual report, with 
an annual recurring burden of five minutes.
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    \5\ Low-risk entities include, for example, public warehouse and 
storage firms, nursing and residential care facilities, automotive 
equipment rental and leasing firms, office supplies and stationery 
stores, fuel dealers, and financial transactions processing firms.
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    Thus, the estimated hours burden for low-risk entities is as 
follows:
     60,974 low risk entities that have covered account subject 
to the FTC's jurisdiction at an average annual burden of approximately 
37 minutes per entity [average annual burden over 3-year clearance 
period for creation and implementation of streamlined Program 
((60+5+5)/3), plus average annual burden over 3-year clearance period 
for staff training ((10+5+5)/3), plus average annual burden over 3-year 
clearance period for preparing annual report ((10+5+5)/3], for a total 
of 37,600 hours.
2. Estimated Hours Burden--Card Issuers Rule
    As noted above, section 114 also requires financial institutions 
and covered creditors that issue credit or debit cards to establish 
policies and procedures to assess the validity of a change of address 
request, including notifying the cardholder or using another means of 
assessing the validity of the change of address.
     FTC staff estimates that the Rule affects as many as 
16,301 \6\ card issues within the FTC's jurisdiction. FTC staff 
believes that most of these card issuers already have automated the 
process of notifying the cardholder or are using another means to 
assess the validity of the change of address, such that implementation 
will pose no further burden. Nevertheless, taking a conservative 
approach, FTC staff estimates that it will take each card issuer 4 
hours to develop and implement policy and procedures to assess the 
validity of a change of address request for a total burden of 65,204 
hours.
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    \6\ Card issuers within the FTC's jurisdiction include, for 
example, state credit unions, general retail merchandise stores, 
colleges and universities, and telecoms.
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    Thus, the total average annual estimated burden for Section 114 is 
1,420,068 hours.
 3. Estimated Cost Burden--Red Flags and Card Issuers Rules
    The FTC staff estimates labor costs by applying appropriate 
estimated hourly cost figures to the burden hours described above. It 
is difficult to calculate with precision the labor costs associated 
with compliance with the Rule, as they entail varying compensation 
levels of management (e.g., administrative services, computer and 
information systems, training and development) and/or technical staff 
(e.g., computer support specialists, systems analysts, network and 
computer systems administrators) among companies of different sizes. 
FTC staff assumes that for all entities, professional technical 
personnel and/or management personnel will create and implement the 
Program, prepare the annual report, and train employees, at an hourly 
rate of $54.\7\
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    \7\ This estimate is based on mean hourly wages found at https://www.bls.gov/news.release/ocwage.t01.htm (``Occupational Employment 
and Wages--May 2014,'' U.S. Department of Labor, released March 
2015, Table 1 (``National employment and wage data from the 
Occupational Employment Statistics survey by occupation, May 2014'') 
for the various managerial and technical staff support exemplified 
above (administrative service managers, computer & information 
systems managers, training & development managers, computer systems 
analysts, network & computer systems analysts, computer support 
specialists).
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    Based on the above estimates and assumptions, the total annual 
labor costs for all categories of covered entities under the Red Flags 
and Card Issuers Rules for Section 114 is $76,683,672 (1,420,068 hours 
x $54).

B. FCRA Section 315--The Address Discrepancy Rule

    As discussed above, the Rule's implementation of Section 315 
provides guidance on reasonable policies and procedures that a user of 
consumer reports must employ when a user receives a notice of address 
discrepancy from a CRA. Given the broad scope of users of consumer 
reports, it is difficult to determine with precision the number of 
users of consumer reports that are subject to the FTC's jurisdiction. 
As noted above, there are numerous small businesses under the FTC's 
jurisdiction, and there is no formal way to track them; moreover, as a 
whole, the entities under the FTC's jurisdiction are so varied that 
there are no general sources that provide a record of their existence. 
Nonetheless, FTC staff estimates that the Rule's implementation of 
section 315 affects approximately 1,875,275 users of

[[Page 42809]]

consumer reports subject to the FTC's jurisdiction.\8\ Commission staff 
estimates that approximately 10,000 of these users will receive notice 
of a discrepancy, in the course of their usual and customary business 
practices, and thereby have to furnish to CRAs an address 
confirmation.\9\
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    \8\ This estimate is derived from an analysis of Census 
databases of U.S. businesses based on NAICS codes for businesses in 
industries that typically use consumer reports from CRAs described 
in the Rule, which total 1,875,275 users of consumer reports subject 
to the FTC's jurisdiction.
    \9\ Report to Congress Under Sections 318 and 319 of the Fair 
and Accurate Credit Transactions of 2003, Federal Trade Commission, 
80 (Dec. 2004) available at https://www.ftc.gov/reports/facta/041209factarpt.pdf.
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    For section 315, as detailed below, FTC staff estimates that the 
average annual burden during the three-year period for which OMB 
clearance is sought will be 876,795 hours with an associated labor cost 
of $15,782,310.
1. Estimated Hours Burden
    Prior to enactment of the Address Discrepancy Rule, users of 
consumer reports could compare the address on a consumer report to the 
address provided by the consumer and discern for themselves any 
discrepancy. As a result, FTC staff believes that many users of 
consumer reports have developed methods of reconciling address 
discrepancies, and the following estimates represent the incremental 
amount of time users of consumer reports may require to develop and 
comply with the policies and procedures for when they receive a notice 
of address discrepancy.
a. Customer Verification
    Given the varied nature of the entities under the FTC's 
jurisdiction, it is difficult to determine precisely the appropriate 
burden estimates. Nonetheless, FTC staff estimates that it would 
require an infrequent user of consumer reports no more than 16 minutes 
to develop and comply with the policies and procedures that it will 
employ when it receives a notice of address discrepancy, while a 
frequent user might require one hour. Similarly, FTC staff estimates 
that, during the remaining two years of clearance, it may take an 
infrequent user no more than one minute to comply with the policies and 
procedures it will employ when it receives a notice of address 
discrepancy, while a frequent user might require 45 minutes. Taking 
into account these extremes, FTC staff estimates that, during the first 
year, it will take users of consumer reports under the FTC's 
jurisdiction an average of 38 minutes [the midrange between 16 minutes 
and 60 minutes] to develop and comply with the policies and procedures 
that they will employ when they receive a notice of address 
discrepancy. FTC staff also estimates that the average recurring burden 
for users of consumer reports to comply with the Rule will be 23 
minutes [the midrange between one minute and 45 minutes].
    Thus, for these 1,875,275 entities, the average annual burden for 
each of them to perform these collective tasks will be 28 minutes [(38 
+ 23 + 23) / 3]; cumulatively, 875,128 hours.
b. Address Verification
    For the estimated 10,000 users of consumer reports that will 
additionally have to furnish to CRAs an address confirmation upon 
notice of a discrepancy, staff estimates that these entities will 
require, initially, 30 minutes to develop related policies and 
procedures. But, these 10,000 affected entities likely will have 
automated the process of furnishing the correct address in the first 
year of a three-year PRA clearance cycle. Thus, allowing for 30 minutes 
in the first year, with no annual recurring burden in the second and 
third years of clearance, yields an average annual burden of 10 minutes 
per entity to furnish a correct address to a CRA, for a total of 1,667 
hours.
 2. Estimated Cost Burden
    FTC staff assumes that the policies and procedures for compliance 
with the address discrepancy part of the Rule will be set up by 
administrative support personnel at an hourly rate of $18.\10\ Based on 
the above estimates and assumptions, the total annual labor cost for 
the two categories of burden under section 315 is $15,782,310.
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    \10\ This estimate--rounded to the nearest dollar --is based on 
mean hourly wages for all management occupations found within the 
``Bureau of Labor Statistics, Economic News Release,'' March 25, 
2015, Table 1, ``National employment and wage data from the 
Occupational Employment Statistics survey by occupation, May 2014.'' 
https://www.bls.gov/news.release/ocwage.t01.htm.
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C. Burden Totals for FCRA Sections 114 and 315

    Cumulatively, then, estimated burden is 2,296,863 hours (1,420,068 
hours for section 114 and 876,795 hours for section 315) and 
$92,465,982 ($76,683,672 and $15,782,310) in associated labor costs.

IV. Request for Comment

    You can file a comment online or on paper. For the FTC to consider 
your comment, we must receive it on or before [60 days after 
publication]. Write: ``Red Flags Rule, PRA Comment, Project No. 
P095406'' on your comment. Your comment--including your name and your 
state--will be placed on the public record of this proceeding, 
including, to the extent practicable, on the public Commission Web 
site, at https://ftc.gov/os/publiccomments.shtm. As a matter of 
discretion, the Commission tries to remove individual's home contact 
information from comments before placing them on the Commission Web 
site.
    Because your comment will be made public, you are solely 
responsible for making sure that your comment does not include any 
sensitive personal information, like anyone's Social Security number, 
date of birth, driver's license number, or other state identification 
number of foreign country equivalent, passport number, financial 
account number, or credit or debit card number. You are also solely 
responsible for making sure that your comment does not include any 
sensitive health information, like medical records or other 
individually identifiable health information. In addition, do not 
include any ``[t]rade secret or any commercial or financial information 
. . . which is privileged or confidential]'' as provided in Section 
6(f) of the FTC Act, 15 U.S.C. 46(f), and FTC Rule 4.10(a)(2), 16 CFR 
4.10(a)(2). In particular, don't include competitively sensitive 
information such as costs, sales statistics, inventories, formulas, 
patterns devices, manufacturing processes, or customer names.
    If you want the Commission to give your comment confidential 
treatment, you must file it in paper form, with a request for 
confidential treatment, and you have to follow the procedure explained 
in FTC Rule 4.9(c), 16 CFR 4.9(c).\11\ Your comment will be kept 
confidential only if the FTC General Counsel, in his or her sole 
discretion, grants your request in accordance with the law and the 
public interest.
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    \11\ In particular, the written request for confidential 
treatment that accompanies the comment must include the factual and 
legal basis for the request, and must identify the specific portions 
of the comment to be withheld from the public record. See FTC Rule 
4.9(c), 16 CFR 4.9(c).
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    Postal mail addressed to the Commission is subject to delay due to 
heightened security screening. As a result, we encourage you to submit 
your comments online. To make sure that the Commission considers your 
online comment, you must file it at https://ftcpublic.commentworks.com/ftc/RedFlagsPRA, by following the instructions on the web-based form. 
When this Notice appears at https://www.regulations.gov/#!home, you also

[[Page 42810]]

may file a comment through that Web site.
    If you file your comment on paper, write ``Red Flags Rule PRA, 
Project No. P095406'' on your comment and on the envelope, and mail or 
deliver it to the following address: Federal Trade Commission, Office 
of the Secretary, Constitution Center, 400 7th Street SW., 5th Floor, 
Suite CC-5610 (Annex J), Washington, DC 20024. If possible, submit your 
paper comment to the Commission by courier or overnight service.
    The FTC Act and other laws that the Commission administers permit 
the collection of public comments to consider and use in this 
proceeding as appropriate. The Commission will consider all timely and 
responsive public comments that it receives on or before September 18, 
2015. For information on the Commission's privacy policy, including 
routine uses by the Privacy Act, see https://www.ftc.gov/ftc/privacy.htm.

David C. Shonka,
Principal Deputy General Counsel.
[FR Doc. 2015-17764 Filed 7-17-15; 8:45 am]
 BILLING CODE 6750-01-P