Agency Information Collection Activities; Proposed Collection; Comment Request; Extension

Federal RegisterAug 20, 2002

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FEDERAL TRADE COMMISSION

Agency Information Collection Activities; Proposed Collection; Comment Request; Extension

AGENCY:

Federal Trade Commission (FTC).

ACTION:

Notice.

SUMMARY:

The Federal Trade Commission is seeking public

comments on its proposal to extend through December 31, 2005 the current Paperwork Reduction Act (“PRA”) clearance for information collection requirements contained in four consumer credit regulations enforced by the Commission. That clearance expires on December 31, 2002.

DATES:

Comments must be filed by October 21, 2002.

ADDRESSES:

Send written comments to Secretary, Federal Trade Commission, Room H-159, 600 Pennsylvania Ave., NW., Washington, DC 20580. All comments should be captioned “Regs BEMZ: Paperwork Comment.” Comments in electronic form should be sent to:

RegsBEMZpprwork@ftc.gov,

as prescribed below.

FOR FURTHER INFORMATION CONTACT:

Requests for additional information or copies of the proposed information requirements should be addressed to Carole Reynolds, Attorney, Division of Financial Practices, Bureau of Consumer Protection, Federal Trade Commission, 600 Pennsylvania Ave., NW., Washington, DC 20580, (202) 326-3230.

SUPPLEMENTARY INFORMATION:

Under the PRA (44 U.S.C. 3501-3520), Federal agencies must obtain approval from the Office of Management and Budget (OMB) for each collection of information they conduct or sponsor. “Collection of information” means agency requests or requirements that members of the public submit reports, keep records, or provide information to a third party. 44 U.S.C. 3502(3), 5 CFR 1320.3(c). As required by section 3506(c)(2)(A) of the PRA, the FTC is providing this opportunity for public comment before requesting that OMB extend the existing paperwork clearance for the regulations noted herein.

The FTC invites comments on: (1) Whether the proposed collection of information is necessary for the proper performance of the functions of the agency, including whether the information will have practical utility; (2) the accuracy of the agency's estimate of the burden of the proposed collection of information, including the validity of the methodology and assumptions used; (3) ways to enhance the quality, utility, and clarity of the information to be collected; and (4) ways to minimize the burden of the collection of information on those who are to respond, including through the use of appropriate automated, electronic, mechanical, or other technological collection techniques or other forms of information technology, e.g., permitting electronic submission of responses.

If a comment contains nonpublic information, it must be filed in paper form, and the first page of the document must be clearly labeled “confidential.” Comments that do not contain any nonpublic information may instead be filed in electronic form (in ASCII format, WordPerfect, or Microsoft Word) as part of or as an attachment to e-mail messages directed to the following e-mail box:

RegsBEMZpprwork@ftc.gov.

Such comments will be considered by the Commission and will be available for inspection and copying at its principal office in accordance with Section 4.9(b)(6)(ii) of the Commission's rules of practice, 16 CFR section 4.9(b)(6)(ii)).

The four rules covered by this notice are:

(1) Regulations promulgated under The Equal Credit Opportunity Act, 15 U.S.C. 1691

et seq.

(“ECOA”) (“Regulation B”) (Control Number: 3084-0087);

(2) Regulations promulgated under The Electronic Fund Transfer Act, 15 U.S.C. 1693

et seq.

(“EFTA”) (“Regulation E”) (Control Number: 3084-0085);

(3) Regulations promulgated under The Consumer Leasing Act, 15 U.S.C. 1697

et seq.

(“CLA”) (“Regulation M”) (Control Number: 3084-0086);

(4) Regulations promulgated under The Truth-In-Lending Act, 15 U.S.C. 1601

et seq.

(“TILA”) (“Regulation Z”) (Control Number: 3084-0088);

Each of these four rules impose certain PRA recordkeeping and disclosure requirements associated with providing credit or with other financial transactions. All of these rules require covered entities to keep certain records. Staff believes that these entities would likely retain these records in the normal course of business even absent the recordkeeping requirement in the rules.

There is, however, some burden associated with ensuring that covered entities do not prematurely dispose of relevant records during the period of time required by the applicable rule.

PRA “burden” does not include effort expended in the ordinary course of business, regardless of any regulatory requirement. 5 CFR 1320.3(b)(2).

Disclosure requirements involve both set-up and monitoring costs as well as certain transaction-specific costs. “Set-up” burden, incurred by new entrants only, includes identifying the applicable disclosure requirements, determining compliance obligations, and designing and developing compliance systems and procedures. “Monitoring” burden, incurred by all covered entities, includes reviewing revisions to regulatory requirements, revising compliance systems and procedures as necessary, and monitoring the ongoing operation of systems and procedures to ensure continued compliance. “Transaction-related” burden refers to the effort associated with providing the various required disclosures in individual transactions. While this burden varies with the number of transactions, the figures shown for transaction-related burden in the tables that follow are estimated averages.

The actual range of compliance burden experienced by covered entities, and reflected in those averages, varies widely. Depending on the extent to which covered entities have developed automated systems and procedures for providing the required disclosures, and the efficacy of those systems and procedures, some entities may have little or no such burden, while others incur a higher burden.

For example, large retailers may use automated means to provide required disclosures, such as issuing, en masse, notices of changes of terms. Smaller retailers and certain types of creditors may have less automated compliance systems, and thus may issue disclosures on an individual transaction basis, resulting in higher burden.

Calculating the burden associated with the four regulations' disclosure requirements is very difficult because of the highly diverse group of affected entities. The “respondents” included in the following burden calculations consist of credit and lease advertisers, creditors, financial institutions, service providers, certain government agencies and others involved in delivering electronic fund transfers of government benefits, and lessors. The burden estimates represent staff's best assessment, based on its knowledge and expertise relating to the financial services industry. To derive these estimates, staff considered the wide variations in covered entities: (1) Size and location; (2) credit or lease products offered, extended, or advertised, and their particular terms; (3) types of electronic fund transfers (EFTs) used; (4) types and occurrences of adverse actions; (5) types of appraisal reports utilized; and (6) automation with regard to compliance operations.

In some instances, where covered entities may make certain required disclosures in the ordinary course of business, the Regulation imposes no PRA burden. In addition, some entities have developed highly automated means of providing the required disclosures, while others rely on methods requiring more manual effort.

The estimated PRA burden associated with these rules, attributable to the Commission, is less today than in the past. Staff believes that as automation and expanded quality control become more pervasive in the financial services

industry, entities are able to comply more efficiently.

The cost estimates shown below relate solely to labor costs. The applicable PRA requirements impose minimal capital or other non-labor costs, as affected entities generally have the necessary equipment for other business purposes. Similarly, staff estimates that compliance with these rules entails minimal printing and copying costs beyond that associated with documenting financial transactions in the ordinary course of business. The burden estimates shown below include the time necessary to train staff to be in compliance with the regulations.

The following paragraphs discuss each of these rules, their particular FRA requirements, and staff's best estimates of the related hour and cost burdens.

1. Regulation B

The ECOA prohibits discrimination in the extension of credit. Regulation B, 12 CFR 202, promulgated by the Board of Governors of the Federal Reserve System, establishes both recordkeeping and disclosure requirements to assist consumers in understanding their rights under the ECOA and to assist in detecting unlawful discrimination. The FTC enforces the ECOA as to all creditors except those that are subject to the regulatory authority of another federal agency (such as federally chartered or insured depository institutions).

Estimated annual hours burden:

2,500,000 hours, rounded to the nearest thousand (1,150,000 recordkeeping hours

−

1,409,499 disclosure hours).

Recordkeeping:

FTC staff estimates that Regulation B's general recordkeeping requirements affect 1,000,000 credit firms subject to the Commission's jurisdiction, at an average annual burden of one hour per firm, for a total of 1,000,000 hours. Staff also estimates that the requirement that creditors monitor information about race/national original, sex, age, and marital status imposes a maximum burden of one minute each

for approximately nine million credit applications (based on industry data regarding the approximate number of mortgage purchase and refinance originations), for a total of 150,000 hours. The total estimated recordkeeping burden is 1,150,000 hours.

Regulation B contains a model form the creditors may use to gather and retain the required information.

Disclosure:

Regulation B requires that creditors (

i.e.,

entities that regularly participate in the decision whether to extend credit under Regulation B) provide notices whenever they take adverse action. The Regulation also requires entities that extend various types of mortgage credit to provide a copy of the appraisal report to applicants and to notify them of their right to a copy of the report.

Regulation B applies to retailers, mortgage lenders, mortgage brokers, finance companies, Internet businesses, and others. Below is staff's best estimate of burden applicable to this highly broad spectrum of covered entities.

Disclosure

Setup/monitoring

Respondents

Average burden per respondent (hours)

Total setup/monitoring burden (hours)

Transaction-related

Number of transactions

Average burden per transaction (minutes)

Total transaction burden (hours)

Total burden (hours)

Adverse action notices

1,000,000

500,000

200,000,000

.25

833,333

1,333,333

Appraisal notices

22,000

11,000

6,500,000

.25

27,083

38,083

Appraisal reports

22,000

11,000

6,500,000

.25

27,083

38,083

Total

1,409,499

With respect to appraisal notices and appraisal reports, the above figures assume that approximately half of applicable mortgage entities (.5 x 44,000, or 22,000 businesses) would not otherwise provide this information and thus would be affected.

The above figures assume that half of applicable mortgage transactions (.5 x 13,000,000, or 6,500,000) would not otherwise provide the appraisal notices and reports and thus would be affected.

Estimated annual cost burden:

$46,418,000, rounded to the nearest thousand.

Staff calculated labor costs by applying appropriate hourly cost figures to the burden hours described above. The hourly rates used below ($50 for managerial or professional time, $20 for skilled technical time, and $10 for clerical time) are averages.

Recordkeeping:

Staff estimates that the general recordkeeping responsibility of one hour per creditor would involve approximately 90 percent clerical time and 10 percent skilled technical time. Keeping records of race/national origin, sex, age, and maritial status requires an estimated one minute of skilled technical time. As shown below, the total recordkeeping cost is $14,000,000.

Disclosure:

For each notice or information item listed, staff estimates that the burden hours consist of 10 percent managerial time and 90 percent skilled technical time. As shown below, the total disclosure cost is $32,418,500.

Required task

Managerial

Time (hours)

Cost ($50/hr.)

Skilled technical

Time (hours)

Cost ($20/hr.)

Clerical

Time (hours)

Cost ($10/hr.)

Total cost ($)

General Recordkeeping

100,000

$2,000,000

900,000

$9,000,000

$11,000,000

Other Recordkeeping

150,000

3,000,000

Total Recordkeeping

14,000,000

Adverse action notices

133,333

$6,666,650

1,200,000

24,000,000

30,666,650

Appraisal notices

3,808

190,400

34,275

685,500

875,900

Appraisal reports

3,808

190,400

34,275

685,500

875,900

Total Disclosure

32,418,500

Total Recordkeeping and Disclosure

46,418,450

2. Regulation E

The EFTA requires accurate disclosure of the costs, terms, and rights relating to electronic fund transfer (EFT) services to consumers. Regulation E, 12 CFR 205, promulgated by the Board of Governors of the Federal Reserve System, establishes both recordkeeping and disclosure requirements applicable to entities providing EFT services to consumers. The FTC enforces the EFTA as to all entities providing EFT services except those that are subject to the regulatory authority of another federal agency (such as federally chartered or insured depository institutions).

Estimated annual hours burden:

3,580,000 hours (500,000 recordkeeping hours + approximately 3,080,000 disclosure hours).

Recordkeeping:

Staff estimates that Regulation E's recordkeeping requirements affect 500,000 firms offering EFT services to consumers and subject to the Commission's jurisdiction, at an average burden of one hour per firm, for a total of 500,000 hours.

Disclosure:

Regulation E applies to financial institutions (including certain retailers and electronic commerce entities), service providers, various federal and state agencies offering electronic fund transfers (EFTs), and others. Below is staff's best estimate of burden applicable to this highly broad spectrum of covered entities.

Disclosure

Setup/monitoring

Respondents

Average burden per respondent (hours)

Total setup/monitoring burden (hours)

Transaction-related

Number of transactions

Average burden per transaction (minutes)

Total transaction burden (hours)

Total burden (hours)

Initial terms

100,000

50,000

1,000,000

.02

333

50,333

Change in terms

25,000

12,500

33,000,000

.02

11,000

23,500

Periodic statements

100,000

50,000

1,200,000,00

.02

400,000

450,000

Error resolution

100,000

50,000

1,000,000

83,333

133,333

Transaction receipts

100,000

50,000

5,000,000,000

.02

1,666,667

1,716,667

Preauthorized transfers

500,000

250,000

1,000,000

.25

4,167

254,167

Service provider notices

100,000

.25

25,000

1,000,000

.25

4,167

29,167

Govt. benefit notices

10,000

5,000

100,000,000

.25

416,667

421,667

ATM notices

500

.25

125

250,000

.25

1,041

1,166

Total

3,080,000

Starting in 2001, ATM operators were required to provide certain notices to consumers regarding ATM fees. Generally, these notices must be provided on or at ATM machines and/or on paper before the consumer is committed to paying a fee.

Estimate annual cost burden:

$76,240,000, rounded to the nearest thousand.

Recordkeeping:

For the 500,000 recordkeeping hours, staff estimates that 10 percent of the burden hours require skilled technical time and 90 percent require clerical time. As shown below, the total recordkeeping cost is $5,500,000.

Disclosure:

For each notice or information item listed, staff estimates that 10 percent of the burden hours require managerial time and 90 percent require skilled technical time. As shown below, the total disclosure cost is $70,740,000.

Required task

Managerial

Time (hours)

Cost ($50/hr.)

Skilled technical

Time (hours)

Cost ($20/hr.)

Clerical

Time (hours)

Cost ($10/hr.)

Total cost ($)

Recordkeeping

50,000

$1,000,000

450,000

$4,500,000

$5,500,000

Disclosure:

Initial terms

5,033

$251,650

45,300

$906,000

$1,157,650

Change in terms

2,350

117,500

21,150

423,000

540,500

Periodic statements

45,000

2,250,000

405,000

8,100,000

10,350,000

Error resolution

13,333

666,650

120,000

2,400,000

3,066,650

Transaction receipts

171,667

8,583,350

1,540,000

30,800,000

39,383,350

Preauthorized transfers

25,417

1,270,850

228,750

4,575,000

5,845,850

Service provider notices

2,917

145,850

26,250

525,000

670,850

Govt. benefit notices

42,167

2,108,350

379,500

7,590,000

9,698,350

ATM Notices

116

5,800

1,050

21,000

26,800

Total Disclosure

70,740,000

Total Recordkeeping and Disclosures

76,240,000

3. Regulation M

The CLA requires accurate disclosure of the costs and terms of leases to consumers. Regulations M, 12 CFR 213, promulgated by the Board of Governors of the Federal Reserve System, establishes disclosure requirements that assist consumers in comparison shopping and in understanding the terms of leases and recordkeeping requirements that assist enforcement of the CLA. The FTC enforces the CLA as to all lessors and advertisers except those that are subject to the regulatory authority of another federal agency (such as federally chartered or insured depository institutions).

Estimated annual hours burden:

279,000 hours, rounded to the nearest thousand (150,000 recordkeeping hours + 129,167 disclosure hours).

Recordkeeping:

Staff estimates that Regulation M's recordkeeping requirements affect approximately 150,000 firms leasing products to consumers and subject to the Commission's jurisdiction, at an average annual burden of one hour per firm, for a total of 150,000 hours.

Disclosure:

Regulation M applies to automobile lessors (such as auto dealers, independent leasing companies, and manufacturers' captive finance companies), computer lessors (such as computer dealers and other retailers), furniture lessors, various electronic commerce lessors, and diverse types of lease advertisers, and others. Below is staff's best estimate of burden applicable to his highly broad spectrum of covered entities.

Disclosure

Setup/Monitoring

Respondents

Average burden per respondent (hours)

Total setup/monitoring burden (hours)

Transaction-related

Number of transactions

Average burden per transaction (minutes)

Total transaction burden (hours)

Total burden (hours)

Auto Leases

50,000

.75

37,500

2,500,000

.50

20,833

58,333

Other Leases

100,000

.50

50,000

1,000,000

.25

4,167

54,167

Advertising

25,000

.50

12,500

1,000,000

.25

4,167

16,667

Total

129,167

This category focuses on consumer vehicle leases. Vehicle leasing has decreased in the past two years. Vehicle leases are subject to more lease disclosure requirements (pertaining to computation of payment obligations) than other lease transactions. (Only consumer leases for more than four months are covered.) See 15 U.S.C. 1667(1); 12 CFR 213.2(e)(1).

This category focuses on all types of consumer leases other than vehicle leases. It includes leases for computers, other electronics, small appliances, furniture, and other transactions. (Only consumer leases for more than four months are covered.) See 15 U.S.C. 1667(1); 12 CFR 213.2(e)(1).

Estimated annual cost burden:

$4,621,000, rounded to the nearest thousand.

Recordkeeping:

For the 150,000 recordkeeping hours, staff estimates that 10 percent of the burden hours require skilled technical time and 90 percent require clerical time. As shown below, the total recordkeeping costs is $1,650,000.

Disclosure:

For each notice or information item listed, staff estimates that 10 percent of the burden hours require managerial time and 90 percent require skill technical time. As shown below, the total disclosure cost is $2,970,850.

Required task

Managerial

Time (hours)

Cost ($50/hr.)

Skilled technical

Time (hours)

Cost ($20/hr.)

Clerical

Time (hours)

Cost ($10/hr.)

Total cost ($)

Recordkeeping

15,000

$300,000

135,000

$1,350,000

$1,650,000

Disclosures

Auto Leases

5,833

$291,650

52,500

$1,050,000

$1,341,650

Other Leases

5,417

270,850

48,750

975,000

1,245,850

Advertising

1,667

83,350

15,000

300,000

383,350

Total Disclosures

2,970,850

Total Recordkeeping and Disclosures

4,620,850

4. Regulation Z

The TILA was enacted for foster comparison credit shopping and informed credit decision making by requiring accurate disclosure of the costs and terms of credit to consumers. Regulation, Z, 12 CFR 226, promulgated by the Board of Governors of the Federal Reserve System, establishes both recordkeeping and disclosure requirements to assist consumers and the enforcement of the TILA. The FTC enforces the TILA as to all creditors and advertisers except those that are subject to the regulatory authority of another federal agency (such as federally chartered or insured depository institutions).

Estimated annual hours burden:

20,179,000 hours, rounded to the nearest thousand (1,000,000 recordkeeping hours + 19,178,749 disclosure hours).

Recordkeeping:

FTC staff estimates that Regulation Z's recordkeeping requirements affect approximately 1,000,000 firms offering credit and subject to the Commission's jurisdiction, at an average annual burden of one hour per firm, for a total of 1,000,000 hours.

Disclosure:

Regulation Z disclosure requirements pertain to open-end and closed-end credit. The Regulation applies to retailers (such as department stores, appliance stores, discount retailers, medical-dental service providers, home improvement sellers, and electronic commerce retail operators); mortgage companies; finance companies; credit advertisers; auto dealerships; student loan companies; home fuel or power services (for furnaces, stoves, microwaves, and other heating, cooling or residential power equipment); credit advertisers; and others. Below is staff's best estimate of burden applicable to this highly broad spectrum of covered entities.

Disclosure

Setup/monitoring

Respondents

Average burden per respondent (hours)

Total setup/monitoring burden (hours)

Transaction-related

Number of transactions

Average burden per transaction (minutes)

Total transaction burden (hours)

Total burden (hours)

Open-end credit:

Initial terms

100,000

50,000

50,000,000

.25

208,333

258,333

Rescission notices

10,000

5,000

100,000

.25

417

5,417

Change in terms

25,000

12,500

136,000,000

.125

283,333

295,833

Periodic statements

100,000

50,000

4,800,000,000

.0625

5,000,000

5,050,000

Error resolution

100,000

50,000

10,000,000

833,333

883,333

Credit and charge card accounts

100,000

50,000

50,000,000

.25

208,333

258,333

Home equity lines of credit

10,000

5,000

5,000,000

.25

20,833

25,833

Advertising

250,000

.25

62,500

700,000

5833

68,333

Closed-end credit:

Credit disclosures

800,000

.50

400,000

330,000,000

11,000,000

11,400,000

Rescission notices

100,000

.50

50,000

34,000,000

566,667

616,667

Variable rate mortgages

75,000

.50

37,500

1,800,000

60,000

97,500

High rate/high fee mortgages

50,000

.50

25,000

750,000

25,000

50,000

Reverse mortgages

50,000

.50

25,000

150,000

2,500

27,500

Advertising

500,000

.25

125,000

1,000,000

16,667

141,667

Total open-end credit

6,845,415

Total closed-end credit

12,333,334

Total credit

19,178,749

In some areas, e.g., home equity lines of credit, companies have merged, changed their business focus, and/or have shifted that focus into areas not under the FTC's jurisdiction. Accordingly, staff's estimates account for a reduced number of respondents in these areas. Moreover, computer technology has further facilitated the disclosure process thereby lessening the average burden per respondent, particularly with regard to setup and monitoring.

Estimated annual cost burden:

$452,111,000, rounded to the nearest thousand.

Recordkeeping:

For the 1,000,000 recordkeeping hours, staff estimates that 10 percent of the burden hours require skilled technical time and 90 percent require clerical time. As shown below, the total recordkeeping cost is $11,000,000.

Disclosure:

Required task

Managerial

Time (hours)

Cost ($50/hr.)

Skilled Techincal

Time (hours)

Cost ($20/hr.)

Clerical

Time (hours)

Cost (10/hr.)

Total cost ($)

Recordkeeping

100,000

$2,000,000

900,000

$9,000,000

$11,000,000

Open-end credit Disclosures:

Initial terms

25,833

$1,291,650

232,500

$4,650,000

$5,941,650

Rescission notices

542

$27,100

4,875

$97,500

$124,600

Change in terms

29,583

$1,479,150

266,250

$5,325,000

$6,804,150

Periodic statements

505,000

$25,250,000

4,545,000

$90,900,000

$116,150,000

Error resolution

88,333

$4,416,650

795,000

15,900,000

$20,316,650

Credit and charge card accounts

25,833

$1,291,650

232,500

$4,650,000

$5,941,650

Home equity lines of credit

2,583

$129,150

23,250

$465,000

$594,150

Advertising

6,833

$341,650

61,500

$1,230,000

$1,571,650

Total open-end credit

$157,444,500

Closed-end credit Disclosures:

Credit disclosures

1,140,000

$57,000,000

10,260,000

$205,200,000

$262,200,000

Rescission notices

61,667

$3,083,350

555,000

$11,100,000

$14,183,350

Variable rate mortgages

9,750

$487,500

87,750

$1,755,000

$2,242,500

High rate/high fee mortgages

5,000

$250,000

45,000

$900,000

$1,150,000

Reverse mortgages

2,750

$137,500

24,750

$495,000

$632,500

Advertising

14,167

$708,350

127,500

$2,550,000

$3,258,350

Total closed-end credit

$283,666,700

Total Disclosures

$441,111,200

Total Recordkeeping and Disclosures

$452,111,200

William E. Kovacic,

General Counsel.

[FR Doc. 02-21117 Filed 8-19-02; 8:45 am]

BILLING CODE 6750-01-M

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