Military Credit Monitoring, 57693-57701 [2018-24940]

Agencies

• FEDERAL TRADE COMMISSION

[Federal Register Volume 83, Number 222 (Friday, November 16, 2018)]
[Proposed Rules]
[Pages 57693-57701]
From the Federal Register Online via the Government Publishing Office [www.gpo.gov]
[FR Doc No: 2018-24940]


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FEDERAL TRADE COMMISSION

16 CFR Part 609

RIN 3084-AB54]


Military Credit Monitoring

AGENCY: Federal Trade Commission.

ACTION: Notice of proposed rulemaking; request for public comment.

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SUMMARY: The Federal Trade Commission (``FTC'' or ``Commission'') is 
publishing for comment a proposed rule to implement the credit 
monitoring provisions applicable to active duty military consumers in 
section 302 of the Economic Growth, Regulatory Relief, and Consumer 
Protection Act, which amends the Fair Credit Reporting Act (FCRA). That 
section requires nationwide consumer reporting agencies to provide a 
free electronic credit monitoring service to active duty military 
consumers, subject to certain conditions. The proposed rule defines 
``electronic credit monitoring service,'' ``contact information,'' 
``material additions or modifications to the file of a consumer,'' and 
``appropriate proof of identity,'' among other terms. It also contains 
requirements on how nationwide consumer reporting agencies must verify 
that an individual is an active duty military consumer.

DATES: Written comments must be received on or before January 7, 2019.

ADDRESSES: Interested parties may file a comment online or on paper by 
following the Request for Comment part of the SUPPLEMENTARY INFORMATION 
section below. Write ``Military Credit Monitoring Rulemaking, Matter 
No. R811007'' on your comment and file your comment online at https://ftcpublic.commentworks.com/ftc/militarycreditmonitoringnprm following 
the instructions on the web-based form. If you prefer to file your 
comment on paper, mail your comment to the following address: Federal 
Trade Commission, Office of the Secretary, 600 Pennsylvania Avenue NW, 
Suite CC-5610 (Annex B), 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 B), Washington, DC 20024.

FOR FURTHER INFORMATION CONTACT: Amanda Koulousias (202-326-3334), 
Division of Privacy and Identity Protection, Bureau of Consumer 
Protection, Federal Trade Commission, 600 Pennsylvania Avenue NW, 
Washington, DC 20580.

SUPPLEMENTARY INFORMATION: 

I. Background

    The Economic Growth, Regulatory Relief, and Consumer Protection Act 
(``the Act'') was signed into law on May 24, 2018. Public Law 115-174. 
The Act, among other things, amends section 605A of the FCRA, 15 U.S.C. 
1681c-1 to add a section 605A(k). Section 605A(k)(2) requires that 
nationwide consumer reporting agencies provide free electronic credit 
monitoring services to active duty military consumers.
    Section 605A(k)(3) of the FCRA requires the Commission to issue a

[[Page 57694]]

regulation clarifying the meaning of certain terms used in section 
605A(k)(2), including ``electronic credit monitoring service'' and 
``material additions or modifications to the file of a consumer.'' In 
addition, section 605A(k)(3) requires that the Commission's regulation 
clarify what constitutes appropriate proof that an individual is an 
active duty military consumer.

II. Summary of the Proposed Rule

    The proposed rule applies to nationwide consumer reporting 
agencies, as defined in section 603(p) of the Fair Credit Reporting 
Act, 15 U.S.C. 1681a(p). The proposed rule requires the nationwide 
consumer reporting agencies to provide a free electronic credit 
monitoring service that notifies a consumer of material additions or 
modifications to the consumer's file when the consumer provides (1) 
contact information, (2) appropriate proof that the consumer is an 
active duty military consumer, and (3) appropriate proof of identity. 
The proposed rule specifies that the nationwide consumer reporting 
agency must provide notification to the consumer within 24 hours of the 
material addition or modification. The proposed rule also requires that 
the notices to consumers include a hyperlink to a summary of the 
consumer's rights under the Fair Credit Reporting Act, as prescribed by 
the Bureau of Consumer Financial Protection under 15 U.S.C. 1681g(c).
    The proposed rule defines certain key terms. Specifically, the 
proposed rule defines ``electronic credit monitoring service'' as a 
service through which nationwide consumer reporting agencies provide, 
at a minimum, electronic notification of material additions or 
modifications to a consumer's file. Electronic notification may include 
notification by website, mobile application, email, or text message. In 
addition, the proposed rule defines ``material additions or 
modifications'' as significant changes to a consumer's file, including: 
(1) New accounts opened in the consumer's name; (2) inquiries or 
requests for a consumer report; (3) changes to a consumer's name, 
address, or phone number; (4) changes to credit account limits; and (5) 
negative information, which is separately defined to include 
information concerning a customer's delinquencies, late payments, 
insolvency, or any form of default. The term ``material additions or 
modifications'' excludes requests for prescreened lists and requests to 
review a consumer's account, as discussed further below.
    The proposed rule also specifies what constitutes appropriate proof 
that the consumer is an active duty military consumer. Under the 
proposed rule, appropriate proof includes a copy of the consumer's 
active duty orders; a certification of active duty status issued by the 
Department of Defense; verification obtained through a method or 
service approved by the Department of Defense; or a certification of 
active duty status approved by the nationwide consumer reporting 
agency.
    Further, the proposed rule restricts nationwide consumer reporting 
agencies' ability to use and disclose the information they collect from 
consumers in order to provide the required electronic credit monitoring 
service. The nationwide consumer reporting agencies may use and 
disclose the information they collect from consumers only for the 
following: (1) To provide the free electronic credit monitoring service 
requested by the consumer; (2) to process a transaction requested by 
the consumer at the same time as a request for the free electronic 
credit monitoring service; (3) to comply with applicable legal 
requirements; or (4) to update information already maintained by the 
nationwide consumer reporting agency for the purpose of providing 
consumer reports.
    Additionally, the proposed rule contains some limitations on 
communications surrounding enrollment in an electronic credit 
monitoring service. First, the proposed rule prohibits any advertising 
or marketing to a consumer who has indicated an interest in obtaining 
the free electronic credit monitoring service for active duty military 
consumers until after the consumer has enrolled in the service. Second, 
the proposed rule does not allow any communications or instructions 
that interfere with, detract from, contradict, or otherwise undermine 
the purpose of the proposed rule. Prohibited communications include 
materials that represent, expressly or by implication, that an active 
duty military consumer must purchase a paid product or service in order 
to receive the service required under Sec.  609.3(a). They also include 
materials that falsely represent, expressly or by implication, that a 
product or service offered ancillary to the free electronic credit 
monitoring service, such as identity theft insurance, is free. The 
proposed rule also prohibits any advertising or marketing for a free 
service, without clearly and prominently disclosing that consumers must 
cancel the service to avoid being charged, if such is the case.
    Finally, the proposed rule prohibits asking or requiring an active 
duty military consumer to agree to terms or conditions in connection 
with obtaining a free electronic credit monitoring service.

III. Section-by-Section Analysis

Section 609.1 Scope of Regulations

    Proposed Sec.  609.1 sets forth the scope of the Commission's rule 
and generally tracks the statutory language in section 605A(k)(2) of 
the Fair Credit Reporting Act. 15 U.S.C. 1681c-1(k)(2). It implements 
the requirement that nationwide consumer reporting agencies, as defined 
in section 603(p) of the Fair Credit Reporting Act, 15 U.S.C. 1681a(p), 
provide a free electronic credit monitoring service to active duty 
military consumers that, at a minimum, notifies them of any material 
additions or modifications to their files.

Section 609.2 Definitions

    Proposed Sec.  609.2 contains definitions for the following terms: 
``active duty military consumer,'' ``appropriate proof of identity,'' 
``consumer,'' ``consumer report,'' ``contact information,'' ``credit,'' 
``electronic credit monitoring service,'' ``electronic notification,'' 
``file,'' ``firm offer of credit,'' ``free,'' ``material additions or 
modifications,'' ``nationwide consumer reporting agency,'' and 
``negative information.''

Active Duty Military Consumer, Consumer, Consumer Report, Credit, File, 
Firm Offer of Credit, Nationwide Consumer Reporting Agency, and 
Negative Information

    Proposed paragraphs (a), (c), (d), (f), (i), (j), (m), and (n) 
incorporate the FCRA's statutory definitions of ``active duty military 
consumer,'' ``consumer,'' ``consumer report,'' ``credit,'' ``file,'' 
``firm offer of credit,'' ``nationwide consumer reporting agency,'' and 
``negative information.'' Each of these terms is used in the proposed 
rule.

Appropriate Proof of Identity

    Proposed paragraph (b) defines ``appropriate proof of identity'' as 
having the same meaning as set forth in 12 CFR 1022.123. Although the 
statute requires only that consumer reporting agencies obtain contact 
information and appropriate proof of active duty military status before 
providing electronic credit monitoring to military consumers, the 
proposed rule adds language that would permit the nationwide consumer 
reporting agencies to request appropriate proof of identity before 
providing a military consumer with the statutorily required credit 
monitoring service.
    The Commission believes that, before providing sensitive consumer 
report information to a military consumer in

[[Page 57695]]

connection with credit monitoring, a consumer reporting agency should 
be able to verify the consumer's identity. Consumer report information 
is very sensitive and it is imperative that consumers only receive 
credit monitoring with respect to their own credit file. For example, 
under section 610 of the FCRA, consumer reporting agencies must obtain 
``proper identification'' from a consumer before providing the consumer 
with a disclosure of his or her credit file. More generally, consumer 
reporting agencies are required to establish reasonable procedures 
designed to limit the furnishing of consumer reports to legitimate 
persons with legitimate purposes for obtaining the report. See 15 
U.S.C. 1681e.
    The proposed rule defines ``appropriate proof of identity'' by 
cross-referencing 12 CFR 1022.123. This existing definition was 
established to provide guidance on what information consumers should be 
required to provide to constitute proof of identity for purposes of 
FCRA sections 605A (obtaining a fraud alert), 605B (requesting that 
information resulting from identity theft be blocked from one's 
consumer report), and 609(a)(1) (requesting a file disclosure from a 
consumer reporting agency). This definition is risk-based, meaning that 
a consumer reporting agency's policy with respect to appropriate proof 
of identity should be commensurate with the risk of harm to the 
consumer resulting from misidentification, and should not unreasonably 
restrict a consumer's access to statutorily required services.
    Because consumer reporting agencies already are required to 
implement procedures for obtaining appropriate proof of identity under 
12 CFR 1022.123, the Commission believes it would be efficient to 
permit consumer reporting agencies to comply with the proposed rule by 
using the same requirements, already in place.
    The Commission is soliciting comments on whether the rule should 
cross-reference 12 CFR 1022.123, stay silent on the definition, or 
develop a different approach.
Contact Information
    Proposed paragraph (e) contains a definition of ``contact 
information.'' The statute allows nationwide consumer reporting 
agencies to condition provision of the free electronic credit 
monitoring service to those consumers that provide both appropriate 
proof that they are active duty military consumers and contact 
information. The Commission believes that clarifying the term ``contact 
information'' is beneficial to the nationwide consumer reporting 
agencies and consumers. Nationwide consumer reporting agencies need a 
minimal amount of information from a consumer in order to provide the 
free credit monitoring service. Accordingly, the proposed rule defines 
``contact information'' as information about a consumer, such as a 
consumer's first and last name and email address, that is reasonably 
necessary to collect in order to provide the electronic credit 
monitoring service.
Electronic Credit Monitoring Service
    Proposed paragraph (g) defines ``electronic credit monitoring 
service'' as a service through which nationwide consumer reporting 
agencies provide electronic notifications of material additions or 
modifications to a consumer's file. Section 605A(k)(3) of the FCRA 
specifically requires the Commission to define this term. The 
Commission believes that this definition and the accompanying 
definitions of ``material addition or modification'' and ``electronic 
notification'' provide the detail necessary for nationwide consumer 
reporting agencies to provide the credit monitoring required by the 
statute.
Electronic Notification
    Proposed paragraph (h) defines ``electronic notification'' as a 
notice provided to the consumer via a website; mobile application; 
email; or text message. The Commission wants to give the nationwide 
consumer reporting agencies and consumers the flexibility to 
communicate in a manner that is most convenient for them. Currently, 
the nationwide consumer reporting agencies typically send customers of 
their commercial credit monitoring services an email alerting them that 
changes have been made to their files. Customers then log in to the 
consumer reporting agency's website to see the specific changes that 
have occurred. Other commercial credit monitoring services provide a 
mobile application through which they notify customers of changes to 
their consumer reports. In addition to these methods, the Commission 
believes some consumers would find the option of receiving 
notifications via text message convenient. However, the Commission 
notes, that any nationwide consumer reporting agency electing to 
provide consumers the option of receiving notifications via text 
message must comply with Telephone Consumer Protection Act, 47 U.S.C. 
227, and all other applicable laws and requirements. The Commission 
welcomes comment on this proposed definition of electronic 
notification.
Free
    Proposed paragraph (k) defines ``free'' as being provided at no 
cost to the consumer. This definition comes from Merriam-Webster's 
Dictionary. The Commission seeks comment on whether a definition of 
``free'' is necessary, and if so, whether it should include any 
additional requirements.
Material Additions or Modifications
    Proposed paragraph (l) defines ``material additions or 
modifications'' as significant changes to a consumer's file, including: 
(1) New accounts opened in the consumer's name; (2) inquiries or 
requests for a consumer report (with the exceptions noted below); (3) 
changes to a consumer's name, address, or phone number; (4) changes to 
credit account limits; and (5) negative information.
    The changes set forth in (1)-(5) above are material because they 
can indicate that a consumer is the victim of identity theft or other 
fraud. The sooner a consumer is alerted to these changes, the sooner 
the consumer can begin to mitigate harm. Notifications of these changes 
are included in many of the credit monitoring products available 
commercially today.
    The definition also includes any other ``significant changes to a 
consumer's file.'' The enumerated list is not exhaustive, and 
nationwide consumer reporting agencies may elect to provide 
notification of other significant changes to a consumer's file. There 
may be other information that is useful to particular types of 
consumers or other significant changes that the Commission cannot 
contemplate today. Therefore, the Commission believes that the 
nationwide consumer reporting agencies should have discretion to 
include additional significant changes to a consumer's file within 
their free electronic credit monitoring service.
    At the same time, the Commission proposes that the definition of 
``material additions or modifications'' specifically exclude (1) 
inquiries for a prescreened list obtained for the purpose of making a 
firm offer of credit or insurance as described in 15 U.S.C. 
1681b(c)(1)(B), and (2) inquiries for the purpose of reviewing an 
account of the consumer (``account review''). As to inquiries for 
prescreened lists, while most credit inquiries signal that a consumer 
is affirmatively seeking credit and may affect their credit scores, 
inquiries for prescreened lists are made without consumers' knowledge 
or specific consent and do not affect their credit scores. Consumers 
may opt out of

[[Page 57696]]

prescreening. The Commission does not believe that there would be any 
benefit to active duty military consumers if they received notification 
every time an inquiry for a prescreened list is made. In fact, 
including inquiries for prescreened lists in the proposed rule's 
notification requirement could result in over-notification to the 
consumer, which could be confusing and make it difficult for consumers 
to determine when an inquiry indicates that they are potentially the 
victim of identity theft or other fraud.
    Similarly, inquiries made for purposes of account review, such as 
when a credit card issuer reviews a customer's credit file in order to 
determine whether to change the annual percentage rate (``APR'') on a 
credit card, also do not indicate that a consumer is shopping for 
credit. These account review inquiries may not result in any changes to 
the consumer's credit account. In cases where account review does 
result in a change to the consumer's credit account, such as by 
increasing the APR on a credit card, the creditor must send the 
consumer a risk-based pricing notice. See 12 CFR 1022.70-1022.75. The 
risk-based pricing notice contains information about the account review 
and provides consumers with additional information and gives them a 
right to obtain a free copy of their consumer report. The Commission 
believes that requiring notification of account review inquiries could 
result in over-notification and be confusing to consumers. For those 
consumers for whom account review results in changes to their credit 
accounts, the risk-based pricing notice is more informative and 
valuable than a notification that simply indicates that a creditor has 
reviewed their credit files.

Section 609.3 Requirement To Provide Free Electronic Credit Monitoring 
Service

    Proposed Sec.  609.3 establishes the basic rules surrounding the 
provision of free electronic credit monitoring to active duty military 
consumers. Paragraph (a) states the general requirement that nationwide 
consumer reporting agencies must provide a free electronic credit 
monitoring service to active duty military consumers.
Determining Whether a Consumer Must Receive Electronic Credit 
Monitoring Service
    Proposed Sec.  609.3(b) allows nationwide consumer reporting 
agencies to condition the provision of the free electronic credit 
monitoring service upon the consumer providing appropriate proof of 
identity, contact information, and appropriate proof that the consumer 
is an active duty military consumer. The Act itself specifically states 
that nationwide consumer reporting agencies need only provide the free 
electronic credit monitoring to consumers that provide contact 
information and appropriate proof of active duty military status.
    The Commission also proposes to include the condition that 
consumers provide the nationwide consumer reporting agencies with 
appropriate proof of identity. Consumer report information is very 
sensitive and it is imperative that consumers only receive credit 
monitoring of their own file. The Commission is proposing to define 
``appropriate proof of identity'' by cross-referencing 12 CFR 1022.123, 
as explained in further detail above.
Appropriate Proof of Active Duty Military Status
    Proposed paragraph (c) fulfills the statutory requirement that the 
Commission determine what constitutes appropriate proof of active duty 
military status. The proposed rule allows active duty military status 
to be verified through: (1) A copy of the consumer's active duty 
military orders; (2) a copy of a certification of active duty status 
issued by the Department of Defense; (3) a method or service approved 
by the Department of Defense; or (4) a certification of active duty 
status approved by the nationwide consumer reporting agency.
    The first two methods require consumers to provide nationwide 
consumer reporting agencies with documents verifying their active duty 
status. The third method--one approved by the Department of Defense--
anticipates future developments in this area. The Commission 
understands from the Department of Defense that there is not currently 
an automated method by which nationwide consumer reporting agencies may 
obtain notice of a consumer's active duty military status from the 
Department of Defense for the purpose of fulfilling their obligations 
under this proposed rule. If such a method does become available, 
however, this language makes sure it would suffice as ``appropriate 
proof of active duty military status'' under the proposed rule. The 
Commission defers to the Department of Defense on what methods it may 
determine are appropriate to prove active duty status.
    The fourth method would allow any nationwide consumer reporting 
agency to develop its own method for determining proof of active duty 
military status. The Commission believes that it may be burdensome for 
consumers and the nationwide consumer reporting agencies to have a 
system that requires documents to be uploaded in order to confirm 
active duty status. In an effort to provide nationwide consumer 
reporting agencies the flexibility to design a less burdensome method 
of proof, the proposed rule allows them to approve other certifications 
of status. For example, the proposed rule would allow the nationwide 
consumer reporting agencies to accept consumers' self-certification of 
active duty military status, e.g., by allowing consumers to check a box 
certifying active duty military status.
    The Commission welcomes comment on the efficacy of these methods, 
and whether there are other methods of determining active duty military 
status that it should add to the definition.
Information Use and Disclosure
    Proposed Sec.  609.3(d) limits nationwide consumer reporting 
agencies' use and disclosure of information they collect from consumers 
as a result of a consumer's request to obtain the free electronic 
credit monitoring service. Specifically, the proposed rule allows 
nationwide consumer reporting agencies to use and disclose information 
collected from consumers only: (1) To provide the free electronic 
credit monitoring service requested by the consumer; (2) to process a 
transaction requested by the consumer at the same time as a request for 
the free electronic credit monitoring service; (3) to comply with 
applicable legal requirements; or (4) to update information already 
maintained by the nationwide consumer reporting agency for the purpose 
of providing consumer reports. Under (4), if a nationwide consumer 
reporting agency updates information it maintains for consumer 
reporting purposes, the updated information is subject to the same 
restrictions that apply to the original, pre-updated data. These 
restrictions on use and disclosure are identical to the requirements 
placed on the nationwide consumer reporting agencies' collection of 
personally identifiable information from consumers using the 
centralized source found in 12 CFR 1022.136(f). Restricting 
``secondary'' use and disclosure of information collected from active 
duty military consumers seeking to obtain the free electronic credit 
monitoring service ensures that these consumers will not be subjected 
to unintended consequences, such as unwanted marketing. Additionally, 
the Commission does not believe that it would be appropriate to make an 
active duty military consumer's access to the free electronic credit

[[Page 57697]]

monitoring service contingent on the consumer's willingness to allow a 
nationwide consumer reporting agency to use the consumer's information 
for unrelated, secondary uses.
    The proposed rule does allow information collected from consumers 
as part of the free electronic credit monitoring enrollment process to 
be used to process transaction requests made by consumers at the same 
time. This provision allows consumers to avoid having to reenter 
information in order to obtain products and services separate from the 
free electronic credit monitoring. For example, a consumer would not 
have to reenter information if, after enrolling in the free electronic 
credit monitoring service, the consumer decided to also obtain identity 
theft insurance. The proposed rule also permits nationwide consumer 
reporting agencies to use and disclose information in order to comply 
with all applicable legal requirements. Finally, the proposed rule 
permits nationwide consumer reporting agencies to use the information 
collected to update information they already maintain for consumer 
reporting purposes, but does not permit them to add additional 
information that they do not already collect from other sources. The 
Commission seeks comments on whether these restrictions are appropriate 
and whether any modifications to the proposed restrictions are 
necessary.
Communications Surrounding Enrollment in Electronic Credit Monitoring 
Service
    Proposed Sec.  609.3(e) places limitations on the types of 
communications that may surround enrollment in the electronic credit 
monitoring service. Section 609.3(e)(1) restricts any advertising or 
marketing for products or services, or any communications or 
instructions that advertise or market any products and services to a 
consumer that has indicated an interest in signing up for the free 
electronic credit monitoring service until after the consumer has 
enrolled in the service. This restriction is similar to the restriction 
on advertising on the annual credit report website found in 12 CFR 
1022.136(g). The goal of including a similar requirement is to ensure 
that the Act's purpose of providing active duty military consumers with 
a free electronic credit monitoring service is not thwarted by 
confusing advertisements or communications that dissuade active duty 
military consumers from enrolling in the free service. The proposed 
requirement is not intended to ban advertising on all web pages of the 
nationwide consumer reporting agencies. Instead, it seeks to limit 
advertising directed to those consumers who have indicated that they 
want to enroll in the free credit monitoring for active duty military 
consumers. Thus, for example, the proposed requirement would apply only 
to the pages on a nationwide consumer reporting agency's website or app 
dedicated to providing active duty military consumers with their rights 
under this regulation. The Commission appreciates that this restriction 
on advertising may increase costs to the nationwide consumer reporting 
agencies by, among other things, requiring them to create separate 
enrollment processes for active duty military consumers. The Commission 
requests comment on whether this restriction is consistent with the 
authority granted under the Act and necessary to ensure that active 
duty military consumers are able to enroll easily in the free 
electronic credit monitoring service.
    Section 609.3(e)(2) of the proposed rule specifies that any 
communications, instructions, or permitted advertising or marketing may 
not interfere with, detract from, contradict, or otherwise undermine 
the purpose of providing a free electronic credit monitoring service to 
active duty military consumers. The proposed rule provides examples of 
conduct that would interfere with, detract from, contradict, or 
undermine the purpose of the rule. For example, a nationwide consumer 
reporting agency would be prohibited from providing materials that 
represent, expressly or by implication, that in order to obtain the 
free credit monitoring service, active duty military consumers must 
also purchase identity theft insurance. This limitation on 
communications is identical to 12 CFR 1022.136(g)'s requirements for 
the centralized source for free annual file disclosures.
    Sections 609.3(e)(1) and (2) are complementary and are designed to 
ensure that active duty military consumers are not confused or deceived 
by communications related to a nationwide consumer reporting agency's 
products and services. Using the example of the identity theft 
insurance product described above, section 609.3(e)(1) would prohibit 
any advertising of such a product from the time the consumer indicates 
an interest in obtaining free credit monitoring for active duty 
military until after that consumer has enrolled in the service. Section 
609.3(e)(2) applies to any advertising before the consumer indicates 
such an interest, or after the consumer has enrolled in the service. It 
also applies to non-advertising communications or instructions relating 
to the free electronic credit monitoring service.
    The Commission recognizes that if done appropriately, access to 
some identity theft services--such as identity theft insurance--may be 
beneficial and convenient for consumers. The Commission wants to 
ensure, however, that these additional services are not offered in a 
way that is confusing to active duty military consumers or dissuades 
them from enrolling in the free electronic credit monitoring service 
that they are entitled to under the Act. The Commission solicits 
comment on whether this restriction is consistent with the authority 
granted under the Act and necessary to ensure that active duty military 
consumers can easily obtain the free credit monitoring service.
Other Prohibited Practices
    Proposed Sec.  609.3(f) prohibits asking or requiring an active 
duty military consumer to agree to terms or conditions in connection 
with obtaining a free electronic credit monitoring service. This 
restriction is similar to the restriction for the annual credit report 
website found in 12 CFR 1022.136(h). The Commission believes that an 
active duty military consumer's right to obtain a free electronic 
credit monitoring service should be unfettered and without any 
restrictions or conditions, apart from providing appropriate proof of 
identity, contact information, and appropriate proof that the consumer 
is an active duty military consumer. The Commission solicits comment on 
whether this restriction is consistent with authority granted under the 
Act and necessary to ensure that active duty military consumers can 
easily obtain the free credit monitoring service.

Section 609.4 Timing of Credit Monitoring Notices

    Proposed Sec.  609.4 requires that the notices required under Sec.  
609.3(a) be provided within 24 hours of any material additions or 
modifications to a consumer's file. Advertisements for commercial 
credit monitoring services that are currently on the market suggest 
that consumers can be notified of changes to their files as soon as 
those changes are detected. Therefore, the Commission believes that 24 
hours provides ample time for the nationwide consumer reporting 
agencies to give an electronic notification to affected consumers.

[[Page 57698]]

Section 609.5 Additional Information To Be Included in Electronic 
Credit Monitoring Notices

    Proposed Sec.  609.5 states that the electronic notifications shall 
include a hyperlink to a summary of the consumer's rights under the 
Fair Credit Reporting Act, as prescribed by the Bureau of Consumer 
Financial Protection under 15 U.S.C. 1681g(c). The Commission believes 
that it will be useful for consumers to be able to easily access 
information about their rights to, for example, obtain consumer reports 
and dispute information on their reports. Including a link to the 
summary with each electronic notification will ensure that consumers 
can find that information when it may be most useful to them. The 
Commission welcomes comment on this proposed requirement.

Section 609.6 Severability

    Proposed Sec.  609.6 states that the provisions of the proposed 
rule are separate and severable from one another, so that if any 
provision is stayed or determined to be invalid, it is the Commission's 
intention that the remaining provisions shall continue in effect.

IV. Request for Comment

    The Commission seeks comment on various aspects of the proposed 
rule. Without limiting the scope of issues on which it seeks comment, 
the FTC is particularly interested in receiving comments on the 
questions that follow. In responding to these questions, please include 
detailed factual supporting information if possible.

Section 609.2 Definitions

    1. Does the definition of ``electronic credit monitoring service'' 
adequately describe the service that the proposed rule should cover? If 
not, how should the definition be modified?
    2. Does the definition of ``material additions or modifications'' 
adequately cover the changes to a consumer's file that should require 
notification? If not, what other elements should be added to the 
definition? Should changes to credit account limits remain in the 
definition? What benefits to consumers would notifications of account 
limit changes provide?
    3. The proposed rule does not require notice to be given if an 
inquiry was made for a prescreened list obtained for the purpose of 
making a firm offer of credit or insurance as described in 15 U.S.C. 
1681b(c)(1)(B) or for the purpose of account review. Are these 
exceptions appropriate? Are there other exceptions that should be added 
to the proposed rule?
    4. The proposed rule requires notice to be given if an inquiry is 
made for the purpose of collection of an account of the consumer. Do 
nationwide consumer reporting agencies have the ability to 
differentiate between inquiries made for the purposes of account review 
and collection?
    5. Is the definition of ``electronic notification'' adequate? Are 
there other methods of notification that should be included in the 
definition?
    6. Is the definition of ``appropriate proof of identity'' 
necessary? Is the current definition, referencing the requirements of 
12 CFR 1022.123 appropriate? Is there a better approach to determining 
what constitutes ``appropriate proof of identity?'' What procedures are 
consumer reporting agencies currently employing to comply with 12 CFR 
1022.123? Do consumer reporting agencies currently require customers of 
commercial credit monitoring services to provide appropriate proof of 
identity? If so, what proof of identity is being required?

Section 609.3 Requirement To Provide Electronic Credit Monitoring 
Service

    1. The proposed rule states that ``appropriate proof of active duty 
military status'' can be verified through: (1) A copy of the consumer's 
active duty orders; (2) a copy of a certification of active duty status 
issued by the Department of Defense; (3) a method or service approved 
by the Department of Defense; or (4) a certification of active duty 
status approved by the nationwide consumer reporting agency. Are these 
methods adequate? Are there other methods of verifying active duty 
status that should be included? What is the most efficient method for 
providing nationwide consumer reporting agencies with proof of active 
duty military status? Is it burdensome for consumers to provide 
appropriate proof? Is there a way to minimize the burden?
    2. Proposed Sec.  609.3(d) restricts secondary uses and disclosures 
of information collected from a consumer requesting to obtain the 
service required under Sec.  609.3(a). Is this limitation necessary to 
ensure that consumers seeking to obtain the free electronic credit 
monitoring service are not forced to provide personal information for 
unrelated, secondary purposes?
    3. Proposed Sec.  609.3(d) allows nationwide consumer reporting 
agencies to use and disclose information collected from consumers 
requesting to obtain the service required under Sec.  609.3(a) only: 
(1) To provide the free electronic credit monitoring service requested 
by the consumer; (2) to process a transaction requested by the consumer 
at the same time as a request for the free electronic credit monitoring 
service; (3) to comply with specific legal requirements; or (4) to 
update information already maintained by the nationwide consumer 
reporting agency for the purpose of providing consumer reports, 
provided that the nationwide consumer reporting agency uses and 
discloses the updated information subject to the same restrictions that 
would apply, under any applicable provision of law or regulation, to 
the information updated or replaced. Are these approved uses 
appropriate? Are there additional uses that should be permitted?
    4. Proposed Sec.  609.3(e)(1) bans marketing until after a consumer 
who has indicated an interest in obtaining the service required under 
Sec.  609.3(a) has enrolled in the free electronic credit monitoring 
service. Is this limitation necessary to ensure that active duty 
military consumers are able easily to obtain their free electronic 
credit monitoring service? Does this limitation impose undue burdens on 
nationwide consumer reporting agencies? If so, is there a way to 
minimize these burdens?
    5. Proposed Sec.  609.3(e)(2) prohibits any communications, 
instructions, or permitted advertising or marketing from interfering 
with, detracting from, contradicting, or otherwise undermining the 
purpose of providing a free electronic credit monitoring service to 
active duty military consumers. Is this prohibition necessary?
    6. Section 609.3(e)(3) provides the following examples of 
prohibited conduct: (1) Any representation that an active duty military 
consumer must purchase a paid product or service in order to obtain the 
free electronic credit monitoring service required by Sec.  609.3(a); 
(2) a false representation that a product or service ancillary to 
receipt of the free electronic credit monitoring service, such as 
identity theft insurance, is free; or (3) the offering of an ongoing 
service without a clear and prominent disclosure that the consumer must 
cancel the service to avoid being charged. Are there more examples of 
prohibited conduct that should be included in the proposed rule? Should 
``clearly and prominently'' be defined?
    7. Proposed Sec.  609.3(f) prohibits asking or requiring an active 
duty military consumer to agree to terms or conditions in connection 
with obtaining a free electronic credit monitoring service. Is this 
prohibition necessary to ensure that active duty military consumers are 
able easily to obtain their free electronic credit monitoring service? 
Do consumer reporting agencies currently require customers of

[[Page 57699]]

commercial credit monitoring services to agree to terms or conditions? 
If so, does this prohibition impose undue burdens on nationwide 
consumer reporting agencies? If so, is there a way to minimize these 
burdens?

Section 609.4 Timing of Credit Monitoring Services

    1. The proposed rule also requires that these notices be provided 
within 24 hours of any material additions or modifications to a 
consumer's file. Is this time requirement appropriate?

Section 609.5 Additional Information To Be Included in Electronic 
Credit Monitoring Notices

    1. The proposed rule requires that the electronic notifications 
include a link to the summary of the consumer's rights under the Fair 
Credit Reporting Act. Will requiring this link provide useful 
information to consumers or is there different information that would 
be more useful? Is there a different method of providing this 
information that would be more effective?
    You can file a comment online or on paper. For the Commission to 
consider your comment, we must receive it on or before January 7, 2019. 
Write ``Military Credit Monitoring Rulemaking, Matter No. R811007'' on 
the 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 FTC website, at https://www.ftc.gov/policy/public-comments.
    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/militarycreditmonitoringnprm by following the instructions on the 
web-based form. If this Notice appears at https://www.regulations.gov, 
you also may file a comment through that website.
    If you file your comment on paper, write ``Military Credit 
Monitoring Rulemaking, Matter No. R811007'' on your comment and on the 
envelope, and mail your comment to the following address: Federal Trade 
Commission, Office of the Secretary, 600 Pennsylvania Avenue NW, Suite 
CC-5610 (Annex B), 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, 
Washington, DC 20024. If possible, please submit your paper comment to 
the Commission by courier or overnight service.
    Because your comment will be placed on the publicly accessible FTC 
website at https://www.ftc.gov, you are solely responsible for making 
sure that your comment does not include any sensitive or confidential 
information. In particular, your comment should not include any 
sensitive personal information, such as your or anyone else's Social 
Security number; date of birth; driver's license number or other state 
identification number, or 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, such as medical records or other 
individually identifiable health information. In addition, your comment 
should not include any ``trade secret or any commercial or financial 
information which . . . is privileged or confidential''--as provided by 
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)--including in particular, competitively sensitive 
information such as costs, sales statistics, inventories, formulas, 
patterns, devices, manufacturing processes, or customer names.
    Comments containing material for which confidential treatment is 
requested must be filed in paper form, must be clearly labeled 
``Confidential,'' and must comply with FTC Rule 4.9(c). 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). Your comment will be kept 
confidential only if the General Counsel grants your request in 
accordance with the law and the public interest. Once your comment has 
been posted on the public FTC website--as legally required by FTC Rule 
4.9(b)--we cannot redact or remove your comment from the FTC website, 
unless you submit a confidentiality request that meets the requirements 
for such treatment under FTC Rule 4.9(c), and the General Counsel 
grants that request.
    Visit the FTC website to read this Notice and the news release 
describing it. 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 
January 7, 2019. For information on the Commission's privacy policy, 
including routine uses permitted by the Privacy Act, see https://www.ftc.gov/site-information/privacy-policy.

V. Communications by Outside Parties to the Commissioners or Their 
Advisors

    Written communications and summaries or transcripts of oral 
communications respecting the merits of this proceeding, from any 
outside party to any Commissioner or Commissioner's advisor, will be 
placed on the public record.\1\
---------------------------------------------------------------------------

    \1\ See 16 CFR 1.26(b)(5).
---------------------------------------------------------------------------

VI. Paperwork Reduction Act

    The Paperwork Reduction Act (``PRA''), 44 U.S.C. chapter 35, 
requires federal agencies to seek and obtain OMB approval before 
undertaking a collection of information directed to ten or more 
persons.\2\ Under the PRA, the Commission may not conduct, or sponsor, 
and, notwithstanding any other provision of law, a person is not 
required to respond to an information collection, unless the 
information displays a valid control number assigned by OMB.
---------------------------------------------------------------------------

    \2\ 44 U.S.C. 3502(3)(A)(i).
---------------------------------------------------------------------------

    As the proposed notification requirements fall upon the three 
nationwide consumer reporting agencies, it does not meet the PRA 
threshold count of ten or more persons to constitute a ``collection of 
information.'' Further, the proof of identity the proposed rule would 
require of those for whom the rulemaking is designed to benefit, 
consumers on active duty military status, falls within OMB's general 
exception for disclosures that require persons to provide or display 
only facts necessary to identify themselves.\3\
---------------------------------------------------------------------------

    \3\ See 5 CFR 1320.3(h)(1).
---------------------------------------------------------------------------

VII. Regulatory Flexibility Act

    The Regulatory Flexibility Act (RFA), as amended by the Small 
Business Regulatory Enforcement Fairness Act of 1996, requires an 
agency to either provide an Initial Regulatory Flexibility Analysis 
with a proposed rule, or certify that the proposed rule will not have a 
significant impact on a substantial number of small entities.\4\ The 
Commission does not expect the proposed Rule will have a significant 
economic impact on small entities. The proposed Rule applies to 
nationwide consumer reporting agencies. The Commission has not 
identified any nationwide consumer reporting agencies

[[Page 57700]]

that are small entities.\5\ This document serves as notice to the Small 
Business Administration of the agency's certification of no effect. 
Nonetheless, the Commission has determined that it is appropriate to 
publish an Initial Regulatory Flexibility Analysis in order to inquire 
into the impact of the proposed Rule on small entities. The Commission 
invites comment on the burden on any small entities and has prepared 
the following analysis.
---------------------------------------------------------------------------

    \4\ 5 U.S.C. 603-605.
    \5\ The size standard the Small Business Administration has 
identified by the North American Industry Classification System code 
for credit bureaus (code number 561450), i.e., consumer reporting 
agencies, is $15 million. See 13 CFR 121.201. The Rule only applies 
to nationwide consumer reporting agencies. There are currently only 
three nationwide consumer reporting agencies, Equifax, Experian, and 
TransUnion, and all exceed this size standard.
---------------------------------------------------------------------------

1. Reasons for the Proposed Rule

    The Economic Growth, Regulatory Relief, and Consumer Protection 
Act, Public Law 115-174, directs the Commission to promulgate 
regulations to implement section 302(d)(1) of the Act, which shall at a 
minimum: (1) Define ``electronic credit monitoring service'' and 
``material additions or modifications to the file of a consumer,'' and 
(2) establish what constitutes appropriate proof that a consumer is an 
active duty military consumer. In this action, the Commission proposes, 
and seeks comment on, a rule that would fulfill the statutory mandate. 
The Act requires that the Commission promulgate this rule not later 
than one year after the date of enactment, or May 24, 2019.

2. Statement of Objectives and Legal Basis

    The objectives of the proposed Rule are discussed above. The legal 
basis for the proposed rule is section 302(d) of the Economic Growth, 
Regulatory Relief, and Consumer Protection Act.

3. Description of Small Entities to Which the Rule Will Apply

    The proposed rule will apply only to nationwide consumer reporting 
agencies. The Commission has not identified any nationwide consumer 
reporting agencies that are small entities.

4. Projected Reporting, Recordkeeping, and Other Compliance 
Requirements

    Under the proposed rule, nationwide consumer reporting agencies 
will have to provide free electronic credit monitoring services to 
active duty military consumers. There are no reporting or recordkeeping 
requirements, or types of professional skills necessary for preparation 
of any such report or record, under the proposed rule. In any event, as 
noted earlier, the proposed rule applies only to nationwide consumer 
reporting agencies, and they are not small entities.

5. Identification of Duplicative, Overlapping, or Conflicting Federal 
Rules

    The Commission has not identified any other federal statutes, 
rules, or policies that would duplicate, overlap, or conflict with the 
proposed rule. The proposed definitions and requirements of the 
proposed rule have been designed to work in conjunction with the 
existing definitions and requirements found in the Fair Credit 
Reporting Act, 15 U.S.C. 1681 et seq., and Regulation V, 12 CFR part 
1022. The Commission invites comment and information on that issue.

6. Discussion of Significant Alternatives

    The Commission has not identified any particular alternative 
methods of compliance as necessary to reduce burdens on small entities, 
because the Commission does not believe any nationwide consumer 
reporting agencies subject to the proposed rule are small entities, as 
noted earlier.

List of Subjects in 16 CFR Part 609

    Consumer reporting agencies, Consumer reports, Credit, Fair Credit 
Reporting Act, Trade practices.

    For the reasons stated in the preamble, the Federal Trade 
Commission proposes to amend chapter I, title 16, Code of Federal 
Regulations, as follows:

0
1. Revise the heading of subchapter F to read as follows:

SUBCHAPTER F--FAIR CREDIT REPORTING ACT

0
2. Add part 609 to subchapter F to read as follows:

PART 609--FREE ELECTRONIC CREDIT MONITORING FOR ACTIVE DUTY 
MILITARY

Sec.
609.1 Scope of regulations in this part.
609.2 Definitions.
609.3 Requirement to provide free electronic credit monitoring 
service.
609.4 Timing of electronic credit monitoring notices.
609.5 Additional information to be included in electronic credit 
monitoring notices.
609.6 Severability.

    Authority:  15 U.S.C. 1681c-1(k).


Sec.  609.1   Scope of regulations in this part.

    This part implements Section 605A(k)(2) of the Fair Credit 
Reporting Act, 15 U.S.C. 1681c-1(k)(2), which requires consumer 
reporting agencies that compile and maintain files on consumers on a 
nationwide basis to provide a free electronic credit monitoring service 
to active duty military consumers that, at a minimum, notifies them of 
any material additions or modifications to their files.


Sec.  609.2  Definitions.

    For purposes of this part, the following definitions apply:
    (a) Active duty military consumer means a consumer in military 
service as defined in 15 U.S.C. 1681a(q)(1) and 1681c-1(k)(1).
    (b) Appropriate proof of identity has the meaning set forth in 12 
CFR 1022.123.
    (c) Consumer has the meaning provided in 15 U.S.C. 1681a(c).
    (d) Consumer report has the meaning provided in 15 U.S.C. 1681a(d).
    (e) Contact information means information about a consumer, such as 
a consumer's first and last name and email address, that is reasonably 
necessary to collect in order to provide the electronic credit 
monitoring service.
    (f) Credit has the meaning provided in 15 U.S.C. 1681a(r)(5).
    (g) Electronic credit monitoring service means a service through 
which nationwide consumer reporting agencies provide, at a minimum, 
electronic notification of material additions or modifications to a 
consumer's file.
    (h) Electronic notification means a notice provided to the consumer 
via:
    (1) A website;
    (2) Mobile application;
    (3) Email; or
    (4) Text message.
    (i) File has the meaning provided in 15 U.S.C. 1681a(g).
    (j) Firm offer of credit has the meaning provided in 15 U.S.C. 
1681a(l).
    (k) Free means provided at no cost to the consumer.
    (l) Material additions or modifications means significant changes 
to a consumer's file, including:
    (1) New accounts opened in the consumer's name;
    (2) Inquiries or requests for a consumer report;
    (i) However, an inquiry made for a prescreened list obtained for 
the purpose of making a firm offer of credit or insurance as described 
in 15 U.S.C. 1681b(c)(1)(B) or for the purpose of reviewing an account 
of the consumer shall not be considered a material addition or 
modification.
    (ii) [Reserved].
    (3) Changes to a consumer's name, address, or phone number;
    (4) Changes to credit account limits; and

[[Page 57701]]

    (5) Negative information.
    (m) Nationwide consumer reporting agency has the meaning provided 
in 15 U.S.C. 1681a(p).
    (n) Negative information has the meaning provided in 15 U.S.C. 
1681s-2(a)(7)(G)(i).


Sec.  609.3  Requirement to provide free electronic credit monitoring 
service.

    (a) General requirements. Nationwide consumer reporting agencies 
must provide a free electronic credit monitoring service to active duty 
military consumers.
    (b) Determining whether a consumer must receive electronic credit 
monitoring service. Nationwide consumer reporting agencies may 
condition provision of the service required under paragraph (a) of this 
section upon the consumer providing:
    (1) Appropriate proof of identity,
    (2) Contact information, and
    (3) Appropriate proof that the consumer is an active duty military 
consumer.
    (c) Appropriate proof of active duty military status. A consumer's 
status as an active duty military consumer can be verified through:
    (1) A copy of the consumer's active duty orders;
    (2) A copy of a certification of active duty status issued by the 
Department of Defense;
    (3) A method or service approved by the Department of Defense; or
    (4) A certification of active duty status approved by the 
nationwide consumer reporting agency.
    (d) Information use and disclosure. Any information collected from 
consumers as a result of a request to obtain the service required under 
paragraph (a) of this section, may be used or disclosed by the 
nationwide consumer reporting agency only:
    (1) To provide the free electronic credit monitoring service 
requested by the consumer;
    (2) To process a transaction requested by the consumer at the same 
time as a request for the free electronic credit monitoring service;
    (3) To comply with applicable legal requirements; or
    (4) To update information already maintained by the nationwide 
consumer reporting agency for the purpose of providing consumer 
reports, provided that the nationwide consumer reporting agency uses 
and discloses the updated information subject to the same restrictions 
that would apply, under any applicable provision of law or regulation, 
to the information updated or replaced.
    (e) Communications surrounding enrollment in electronic credit 
monitoring service. (1) Once a consumer has indicated that the consumer 
is interested in obtaining the service required under paragraph (a) of 
this section, such as by clicking on a link for services provided to 
active duty military consumers, any advertising or marketing for 
products or services, or any communications or instructions that 
advertise or market any products and services, must be delayed until 
after the consumer has enrolled in that service.
    (2) Any communications, instructions, or permitted advertising or 
marketing shall not interfere with, detract from, contradict, or 
otherwise undermine the purpose of providing a free electronic credit 
monitoring service to active duty military consumers that notifies them 
of any material additions or modifications to their files.
    (3) Examples of interfering, detracting, inconsistent, and/or 
undermining communications include:
    (i) Materials that represent, expressly or by implication, that an 
active duty military consumer must purchase a paid product or service 
in order to receive the service required under paragraph (a) of this 
section; or
    (ii) Materials that falsely represent, expressly or by implication, 
that a product or service offered ancillary to receipt of the free 
electronic credit monitoring service, such as identity theft insurance, 
is free, or that fail to clearly and prominently disclose that 
consumers must cancel a service, advertised as free for an initial 
period of time, to avoid being charged, if such is the case.
    (f) Other prohibited practices. A nationwide consumer reporting 
agency shall not ask or require an active duty military consumer to 
agree to terms or conditions in connection with obtaining a free 
electronic credit monitoring service.


Sec.  609.4  Timing of electronic credit monitoring notices.

    The notice required in section 609.3(a) must be provided within 24 
hours of any material additions or modifications to a consumer's file.


Sec.  609.5  Additional information to be included in electronic credit 
monitoring notices.

    The notice required in section 609.3(a) shall include a hyperlink 
to a summary of the consumer's rights under the Fair Credit Reporting 
Act, as prescribed by the Bureau of Consumer Financial Protection under 
15 U.S.C. 1681g(c).


Sec.  609.6  Severability.

    The provisions of this part are separate and severable from one 
another. If any provision is stayed, or determined to be invalid, it is 
the Commission's intention that the remaining provisions shall continue 
in effect.

    By direction of the Commission.
Donald S. Clark,
Secretary.
[FR Doc. 2018-24940 Filed 11-15-18; 8:45 am]
 BILLING CODE 6750-01-P