Prescreened offers will need stronger opt-out notices

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Lending Resource March 2005 • • • Click on the Lending Resource link at www.cunamutual.com By Beth Ringgenberg The Federal Reserve Board concluded in December 2004 that Fair Credit Reporting Act (FCRA) provisions for opt- out notices in prescreened credit offers were not sufficient to make consumers aware of their right to opt out of future prescreening. For several years, Section 615(d) of the FCRA has required that any person who uses a consumer report to make an unsolicited firm offer of credit or insurance — referred to as a “prescreened offer” or “prescreened solicitation” — must provide the consumer with a clear and conspicuous opt-out statement with each solicitation. The Fair and Accurate Credit Transactions Act of 2003 (FACT Act) amends the FCRA section on the notice, requiring that the opt-out statement be presented in a format that is easy to see and understand, in a minimum type size. The final regulations, issued in January 2005, are effective August 1, 2005. This should give credit unions time to modify prescreened solicitation materials, printed and online. However, loan forms will not be affected unless they are sent as part of a prescreened solicitation. Two opt-out notices required The regulation requires that two notices be given regarding the opt-out provisions. The Federal Trade Commission, which issued this regulation, refers to this as a “layered notice”: a short notice on the first page and a long notice somewhere in the solicitation. The short notice language must be: 1. On the first page of the principal promotional document in the solicitation. 2. In a larger type size than the principal text on the same page, and in no smaller than 12-point type. 3. On the page and in a format so that the statement is distinct from other text, such as inside a border. 4. In a type style that is distinct from the principal type style used on the same page. Examples: bold, italic, or underlined type. If the solicitation is in more than one color, the opt-out provisions can be in a contrasting color from the principal text. The long notice language must: 1. Appear in the solicitation. 2. Be in a type size that is no smaller than the type size of the principal text on the same page, and no smaller than eight-point type. 3. Begin with a heading in capital letters and underlined, “PRESCREEN & OPT-OUT NOTICE.” 4. In a type style that is distinct from the principal type style used on the same page. Examples: bold, italic, or underlined type. If the solicitation is in more than one color, the opt-out provisions can be in a contrasting color from the principal text. 5. Be set apart from the other text on the page. Examples: including a blank line above and below the statement; indenting the left and right margins farther than other text on the page. Prescreened offers will need stronger opt-out notices FACT Act requirements beginning August 1 are more rigorous than Fair Credit Reporting Act Beth Ringgenberg is the assistant VP of lending compliance at CUNA Mutual
Group. For more information on provisions
of the FACT Act and the FCRA, refer to the article in the Spring 2005 issue of Compliance, A Journal for
Credit Unions. Subscriptions are $350 per year. Subscribe by
calling 1-800-356-5012, opt. 1. (beth.ringgenberg@cunamutual.com) See samples of the Fair Credit Reporting Act’s
prescreened solicitation opt-out notices, as amended
by the FACT Act, at http://www.ftc.gov/opa/2005
/01/050124factafrn.html.

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