AUGUST 2004

FTC Issues Final Rule on Free Credit Reports

On June 4, 2004 the Federal Trade Commission issued its final rule on the free annual credit reports that credit reporting agencies are required to provide consumers under last year's Fair and Accurate Credit Transactions Act (FACTA). The rule calls for a transition period characterized by a gradual roll out of the free reports, in order to reduce the customer-service compliance burden on the national consumer credit reporting agencies.

The reporting agencies must establish a centralized source for accepting consumer requests for free credit reports. The centralized source must include a dedicated Internet Web site, a toll-free telephone number and a postal address. During the transition period, the centralized source will become available to consumers gradually over a nine-month period beginning on December 1, 2004. Consumers in the western part of the United States will have access first, and the rollout will proceed west to east, to be completed by September 1, 2005.

Under the final rule the centralized source must have adequate capacity to accept requests from the "reasonably anticipated volume of consumers making the requests." The source can only collect as much personally identifiable information from consumers as is necessary to process the requests, and may not use that information for marketing purposes or for any other purposes other than complying with the applicable law. The centralized source must provide clear and easily understandable information and instructions as to how to make requests, and cannot include any advertising or marketing messages that interfere with, detract from or undermine the purpose of the centralized source under the rule.