Affiliate Mktg 2013 SS final

Federal Trade Commission
Supporting Statement for the Affiliate Marketing Rule
16 C.F.R. Part 680
(OMB Control No. 3084-0131)
(1) & (2)

Necessity for and Use of the Information Collection

The disclosure provisions for which the Federal Trade Commission (“FTC” or
“Commission”) seeks renewed OMB clearance implement section 214 of the Fair and Accurate
Credit Transactions Act of 2003 (“FACT Act”), Pub. L. No. 108-159 (2003), and Title X of the
Dodd-Frank Wall Street Reform and Consumer Protection Act (“Dodd-Frank Act”), Pub. L. 111203, 124 Stat. 1376 (2010).
The FACT Act amended the Fair Credit Reporting Act (“FCRA”), in part, to allow
consumers to limit the use of “eligibility information” received from an affiliate to make
solicitations to the consumer. Section 214 of the FACT Act added a new section 624 under the
FCRA. The latter section gave consumers the right to restrict a covered entity from using certain
information about a consumer obtained from an affiliate to make marketing solicitations to that
consumer.
Section 214 required the FTC, in consultation and coordination with various federal
agencies charged with regulating affiliated companies, to issue “consistent and comparable”
regulations to implement these provisions as to those entities over which it has enforcement
jurisdiction. FACT Act § 214(b). On October 30, 2007, the Commission issued a final rule
(“Rule”) to implement these consumer disclosure requirements as mandated by the FACT Act.
The Rule’s disclosure requirements are subject to the provisions of the Paperwork
Reduction Act, 44 U.S.C. Chapter 35 (“PRA”). The Rule generally provides that, if a company
communicates certain information about a consumer (eligibility information) to an affiliate, the
affiliate may not use it to make or send solicitations to him or her unless the consumer is given
notice and a reasonable opportunity to opt out of such use of the information and s/he does not.
Additionally, where a company has chosen to set a limited time period for the opt-out (no less
than 5 years), the company must provide prior to the expiration of the opt-out a notice that the
consumer has a right to extend the opt-out for an additional period of time of at least 5 years
(extension notice).
The Rule provides model disclosures that covered entities may use. The Rule does not
include recordkeeping requirements.
The Dodd-Frank Act substantially changed the federal legal framework for financial
services providers. Among the changes, the Dodd-Frank Act transferred to the Consumer
Financial Protection Board (“CFPB”) most of the FTC’s rulemaking authority for the affiliate
marketing provisions of the FCRA on July 21, 201l. The Commission, however, retains
rulemaking authority under FCRA over any motor vehicle dealers described in Section 1029(a)
of the Dodd-Frank Act that are predominantly engaged in the sale and servicing of motor
vehicles, the leasing and servicing of motor vehicles, or both.

On December 21, 2011, the CFPB issued its interim final FCRA rule, Regulation V. The
affiliate marketing provisions, subpart C, became effective on December 30, 2011, and are
codified at 12 C.F.R. 1022.20. Regulation V does not affect the pre-existing requirements of the
FCRA. Additionally, the FTC shares enforcement authority with the CFPB for provisions of
Regulation V that apply to other entities. Thus, the FTC and CFPB have overlapping
enforcement authority.
Contemporaneous with the issued interim final rule, the CFPB and FTC had each
submitted to OMB and received its approval for, the agencies’ respective burden estimates
reflecting their overlapping enforcement jurisdiction, with the FTC supplementing its estimates
for the enforcement authority exclusive to it regarding the class of motor vehicle dealers noted
above. The discussion below continues that analytic framework, as appropriately updated or
otherwise refined for instant purposes.
NOTE: “Rule” when used below references the FTC’s Affiliate Marketing Rule.
“Rules” refer collectively to the FTC Rule and subpart C of the CFPB’s Regulation V.
(3)

Information Technology

The Rule gives explicit examples of electronic options that covered entities may use to
transmit the affiliate marketing notice and opt-out notice (i.e., collections of information) that are
required by the Rule. These electronic options help minimize the burden and cost of the Rule’s
information collection requirements for entities subject to the Rule. Likewise, the Rule is
consistent with the Government Paperwork Elimination Act, 44 U.S.C. § 3504.
(4)

Efforts to Identity Duplication

The Rule provides, as required under section 214(b)(3)(C) of the FACT Act, FCRA §
624(b), that the affiliate marketing notice and opt-out may be coordinated and consolidated with
any other required notice, for example, the privacy notice mandated by the Gramm-Leach-Bliley
Act (“GLBA”), 15 U.S.C. § 6801-6809, for financial institutions, thereby eliminating or reducing
duplicate disclosures to consumers. Furthermore, the Rule provides that affiliated companies
may send a joint disclosure to consumers, thereby eliminating the need for each affiliate to send
a separate disclosure.
(5)

Efforts to Minimize Small Organization Burden

The Commission drafted the Rule to minimize the compliance burden as much as
possible. As noted above, the notice requirements are expressly mandated by the FTC Act. The
Commission’s Rule implements these requirements by providing model notices while affording
small businesses (and all other regulated businesses) some flexibility in choosing the specific
content. Staff believes that the model notices will help eliminate much of the administrative and
legal costs that businesses might incur in seeking to comply with the Rule. In addition, the Rule
provides an affiliate some flexibility in choosing how to deliver notification. Among other ways,
and depending on the circumstances, an affiliate may provide required notification by handdelivery or by postal or electronic mail.
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(6)

Consequences of Conducting the Collection Less Frequently

A less frequent collection of information would violate both the express statutory
language and intent of the FACT Act. See Section 214(a) of the FTC Act.
(7)

Circumstances Requiring Collection Inconsistent with Guidelines

The collection of information in the Rule is consistent with the applicable guidelines
contained in 5 C.F.R. § 1320.5(d)(2).
(8)

Public Comments/Consultation Outside the Agency

The Commission most recently sought public comment on the PRA aspects of the Rule,
as required by 5 C.F.R. 1320.8(d). See 78 Fed. Reg. 52,918 (Aug. 27, 2013). No comments
were received. The Commission is providing a second opportunity for public comment while
seeking OMB approval to extend the existing PRA clearance for the notice provisions of the
Rules.
(9)

Payments or Gifts to Respondents
Not applicable.

(10) & (11)

Assurances of Confidentiality/Matters of a Sensitive Nature

The requirements for which the Commission seeks OMB clearance do not involve
disclosure of confidential respondent or customer information but, rather, the disclosure of
covered entities’ practices regarding the use of certain eligibility information by affiliates for
marketing solicitations to consumers.
(12)

Estimated Annual Hours Burden
The Commission estimates its share of PRA burden hours as follows:
A.

Number of Respondents

FTC staff estimates that approximately 1,174,347 non-GLBA entities and 16,750 GLBA
entities under FTC jurisdiction have affiliates and would be affected by the Rule. Staff further
estimates an average of 5 businesses per family or affiliated relationship, and believes that the
affiliated entities will choose to send a joint notice, as permitted by the Rule. Accordingly, an
estimated 234,869 non-GLBA and 3,350 GLBA business families are subject to the Rule.
Additionally, the Commission estimates that there are 1,021 non-GLBA and 9,190 GLBA motor
vehicle dealerships. 1 Applying the same average of 5 businesses per family or affiliated
relationship, there are approximately 204 non-GLBA and 1,838 GLBA motor vehicle dealership
families covered by the Rule.

1

See 78 Fed. Reg. at 52,920.

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B.

FTC Share of Burden Hours: 560,609 hours

FTC staff assumes that non-GLBA business families will spend 14 hours in the first year
and 0 hours thereafter to comply with the Rule, while GLBA business families will spend 6
hours in the first year, and 4 hours in each of the following two years. 2 The cumulative average
annual burden for both non-GLBA entities (1,096,055 hours) and GLBA entities (15,633 hours)
for the prospective three-year clearance period is 1,111,688 hours.
To calculate the FTC’s total shared burden hours, staff deducted from the total burden
hours (1,111,688 hours) those attributed to motor vehicle dealership families (9,529 hours),
leaving a total of 1,102,159 hours to split between the CFPB and the FTC. The resulting shared
burden is 551,080 hours. For the FTC, staff added the burden hours associated with motor
vehicle dealers (9,529 hours), resulting in a total burden of 560,609 hours.
C.

FTC Share of Labor Costs: $21,173,214

FTC staff assumes that for non-GLBA entities, management (7 hours), technical staff (2
hours), and clerical staff (5 hours) will handle Rule compliance. Staff further assumes that for
GLBA entities, management (5 hours) and technical staff (1 hour) will be necessary to execute
the required Rule notice, with 5 hours of managerial and 1 hour technical labor in the first year,
and 3 hours of managerial and 1 hour technical labor in ensuing years. The hourly wages for
these classifications are $52.20, $38.55, and $16.54, respectively. 3 Multiplying each
occupation’s hourly wage by the associated time estimate yields an accumulative average annual
labor cost burden of $41,888,066 ($41,117,733 for non-GLBA entities and $770,333 for GLBA
entities). 4
To calculate the FTC’s total shared labor costs, staff deducted from the total costs
($41,888,066) those attributed to motor vehicle dealerships ($458,362), leaving a total net
amount of $41,429,704 to split between the CFPB and the FTC. The resulting shared burden for
the CFPB is half that amount, or $20,714,852. To calculate the FTC burden hours for the FTC,
staff added the costs associated with motor vehicle dealers ($458,362), resulting in a total cost
burden for the FTC of $21,173,214.

2

In both cases, this amounts to 4.666667 hours, annualized, based on a three-year PRA clearance.

3

These amounts are drawn from OCCUPATIONA L EMPLOYM ENT AND WAGES —MAY 2012, U.S.
Department of Labor, Bureau of Labor Statistics, released March 29, 2013, Table 1 (“National employment and
wage data from the Occupational Employment Statistics survey by occupation, May 2012”):
http://www.bls.gov/news.release/ocwage.t01.htm. The classifications used are “Management Occupations” for
managerial employees, “Computer and Mathematical Science Occupations” for technical staff, and “Office and
Administrative Support” for clerical workers.
4

Annualized over the course of a three-year PRA clearance.

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D.

Capital/Non-Labor costs: $0

Assumption: Capital and other non-labor costs should be minimal, at most, since the
Rule has been in effect several years, with covered entities now equipped to provide the required
notice.
Based on staff’s review of industry data and its experience in this area, we have no
information to suggest that these figures are not still valid.
(13)

Estimated Capital/Other Non-Labor Costs Burden

GLBA entities are already providing notices to their customers so there are no new
capital or other non-labor costs, as this notice may be consolidated into their current notices. For
non-GLBA entities, the Rule provides simple and concise model notices that they may use to
comply. Thus, any capital or non-labor costs associated with compliance for these entities are
negligible.
(14)

Estimate of Cost to Federal Government

Staff estimates that the fiscal year cost to the FTC Bureau of Consumer Protection of
enforcing the Rule’s disclosure requirements will be approximately $225,000 per year. This
estimate is based on the assumption that 1.5 full attorney work years will be expended to enforce
the Rule’s requirements relating to disclosure. Clerical and other support services are also
included in this estimate.
(15)

Program Changes or Adjustments

There are no program changes. Staff has adjusted its previously stated estimate of burden
hours and the number of non-GLBA entities that may send the affiliate marketing notice based
on updated inputs within the SIC codes from businesses that market goods or services to
consumers in certain industries. It has also corrected its prior calculations based on the
continuing assumed rate of affiliation (16.75%). Additionally, although the estimated number of
GLBA business entities and families remain the same as the prior estimate, staff slightly refined
the calculation to arrive at the net number of GLB business entities subject to the FTC’s
jurisdiction. 5
(16)

Plans for Tabulation and Publication
Not applicable.

5

3,350 GLB business families – 1,838 GLB motor vehicle dealership families = 1,512 GLB business families to
split 50:50 between the agencies, i.e., 756 non-motor vehicle GLB business families. Adding back to the FTC the
apportionment for motor vehicle dealership families (1,838) totals 2,594 GLB business families for the FTC share.
Previously, the FTC showed 2,584 such entities in its ROCIS totals.

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(17)

Display of Expiration Date for OMB Approval
Not applicable.

(18)

Exceptions to Certification
Not applicable.

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