[Federal Register Volume 75, Number 207 (Wednesday, October 27, 2010)]
[Proposed Rules]
[Pages 66018-66037]
From the Federal Register Online via the Government Publishing Office [www.gpo.gov]
[FR Doc No: 2010-26893]


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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:
    <bullet> Federal eRulemaking Portal: http://www.regulations.gov. 
Follow the instructions for submitting comments.
    <bullet> Regular Mail: David Stawick, Secretary, Commodity Futures 
Trading Commission, Three Lafayette Centre, 1155 21st Street, NW., 
Washington, DC 20581.
    <bullet> E-mail: <a href="/cdn-cgi/l/email-protection#ddbcb0af9dbebba9bef3bab2ab"><span class="__cf_email__" data-cfemail="5f3e322d1f3c392b3c71383029">[email protected]</span></a>.
    <bullet> 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: <a href="/cdn-cgi/l/email-protection#3655695d53585853524f765550425518515940"><span class="__cf_email__" data-cfemail="a4c7fbcfc1cacac1c0dde4c7c2d0c78ac3cbd2">[email protected]</span></a>.

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:
    <bullet> 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.
    <bullet> 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.
    <bullet> 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.
    <bullet> 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.
    <bullet> 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.
---------------------------------------------------------------------------

    \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].''
---------------------------------------------------------------------------

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:
    <bullet> 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;
    <bullet> 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
    <bullet> 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.
---------------------------------------------------------------------------

    \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).
---------------------------------------------------------------------------

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.
---------------------------------------------------------------------------

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

    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.
---------------------------------------------------------------------------

    \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.
---------------------------------------------------------------------------

    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 
<a href="/cdn-cgi/l/email-protection#b9f6f0ebf8caccdbd4d0cacad0d6d7caf9d6d4db97dcd6c997ded6cf"><span class="__cf_email__" data-cfemail="c58a8c9784b6b0a7a8acb6b6acaaabb685aaa8a7eba0aab5eba2aab3">[email protected]</span></a>. 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.
---------------------------------------------------------------------------

    \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).
---------------------------------------------------------------------------

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.
    <bullet> A-1 Model Form for Initial Opt-out notice (Single-
Affiliate Notice)
    <bullet> A-2 Model Form for Initial Opt-out notice (Joint 
Notice)
    <bullet> A-3 Model Form for Renewal Notice (Single-Affiliate 
Notice)
    <bullet> A-4 Model Form for Renewal Notice (Joint Notice)
    <bullet> 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-<greek-i><greek-i><greek-i>-
<greek-i><greek-i><greek-i><greek-i>
--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-<greek-i><greek-i><greek-i>-
<greek-i><greek-i><greek-i><greek-i>
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-<greek-i><greek-i><greek-i>-
<greek-i><greek-i><greek-i><greek-i>
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-<greek-i><greek-i><greek-i>-
<greek-i><greek-i><greek-i><greek-i>
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-<greek-i><greek-i><greek-i>-
<greek-i><greek-i><greek-i><greek-i>
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


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