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FACT Act amends requirements on prescreened solicitations

November 22, 2010
Disclosure mandatory Aug. 1

A new Federal Trade Commission rule requires notice to consumers regarding their right to "opt-out" of future prescreened solicitations. Under the Fair Credit Reporting Act (FCRA), persons who use a credit report to make an unsolicited or "prescreened" offer of credit to a consumer must clearly and conspicuously disclose certain items with each written prescreened solicitation.

 

The Fair and Accurate Credit Transactions Act of 2003 (FACT Act), which amends the FCRA, directs the FTC to adopt the "opt-out" rule, effective Aug. 1.

 

Existing duties on users of prescreened lists

 

  • In order to access credit reports to make prescreened solicitations—such as "pre-approved" offers for credit cards—a business must establish the criteria for offering and granting credit before the offer is made, maintain the criteria on file for three years from the date of the offer, and make a "firm offer of credit" to any consumers who meet the criteria.
  • Clear and conspicuous disclose with each prescreened offer must include:

        (iinformation contained in the consumer’s credit file was used in connection with the offer;

        (ii) the consumer received the offer for having satisfied certain screening criteria for creditworthiness;

        (iii) credit may not be extended if, after the consumer responds, the consumer does not meet the screening criteria or other applicable criteria bearing on creditworthiness, or does not furnish any required collateral; and

        (iv) the consumer may prohibit, or "opt-out" of, the use of his credit information in future prescreened offers of credit by contacting the Consumer Reporting Agency (CRA) that provided the consumer’s information. The business must provide the CRA’s address and toll-free phone number, for receiving the consumer’s opt-out election.

 

Summary of new disclosure requirements

 

  • The new rule requires that the opt-out notice be presented in a format, type size and manner that is "simple and easy to understand."

 

To achieve that, a business must provide two notices with any prescreened offer: a prominent short notice, with basic opt-out information, and a long notice that provides additional required information. The Short and Long Notices must be in the same language as the solicitation. Requirements for each notice are set forth as follows:

 

Short Notice 

  • Opt-out opportunity must appear on the front side of the first page of the document, such as a solicitation cover letter. For electronic solicitations, since the Short Notice may not always appear on the first screen of the solicitation due to varying computer settings, it must be included on the same page and in close proximity to the principal marketing text.
  • The content must state that the consumer has the right to opt-out of receiving prescreened solicitations, and it must provide the toll-free number the consumer can call to exercise that right. 
  • Notice must direct the consumer to the long notice and state the heading for the long notice.
  • It may not contain any other information.
  • It must be in a type size that is larger than the type size of the principal text on the same page, but not smaller than 12-point type. For electronic notices, "reasonable steps" must be taken to ensure that the Short Notice is in a type size that is larger than the principal text.
  • Notice must be located on the page and in a format so that the statement is distinct from other text, such as inside a border. It also must be in a type style that is distinct from the principal type style, such as bolded, italicized, underlined and/or in a different color.

 

Long Notice

  • Opt-out opportunity must be clear and conspicuous and begin with the heading: "PRESCREEN & OPT-OUT NOTICE."
  • Its type size may not be smaller than the type size of the principal text.  In electronic solicitations, the type size may not be smaller than 8-point type. Type also must be in a style that is distinct from the principal type style, such as bolded, italicized, underlined and/or in a different color.
  • Notice must be set apart from other text on the same page, such as by including a blank line above and below the statement, and by indenting both the left and right margins from other text on the page.
  • Its content must consist of the disclosure information currently required under FCRA (summarized above). It may contain additional information, such as information about the benefits of prescreening, so long as it "does not interfere with, detract from, contradict, or undermine the purpose of the prescreen notices."
  • If the solicitation is only one page long, both the Short Notice and Long Notice may appear on the same page.
  • Businesses are granted some flexibility with the location of the Long Notice; the Final Rule allows the Long Notice to be placed in any location within the solicitation so long as that location is referenced in the Short Notice.

 

A copy of the Final Rule (including the model notices) is at http://a257.g.akamaitech.net/7/257/2422/01jan20051800/edocket.access.gpo.gov/2005/pdf/05-1678.pdf

 

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