Federal Regulators Propose Affiliate Marketing Rules

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Federal regulators have proposed long-awaited affiliate marketing rules that would help implement the Fair Credit Reporting Act of 2003, which requires banks, thrifts and credit unions to give consumers a chance to opt out of most efforts to share personal financial information with corporate affiliates.

The proposed rules would have a direct effect on holding companies that own life insurance companies along with banks, thrifts or credit unions.

The U.S. Treasury Department and other financial institution regulatory agencies are asking members of the public to submit comments on the proposed rules to the Federal Trade Commission by Aug. 16.

The American Council of Life Insurers, Washington, says its privacy experts, outside counsel and member companies still are preparing the ACLIs comment.

“We have a number of concerns,” says ACLI spokesman Jack Dolan. “The draft appears to us at first read to go beyond the intent of Congress.”

The ACLI believes the final version of the affiliate marketing rules should use the precise language Congress enacted in FCRA, Dolan says.

One section of the proposed rules attempts to give detailed advice about how financial institutions ought to comply with requirements that notices to consumers and opt-out forms be clear.

Methods might include “using clear and concise sentences, paragraphs and sections; using short explanatory sentences; using bullet lists; using definite, concrete, everyday words; using active voice; avoiding multiple negatives; avoiding legal and highly technical business terminology; and avoiding explanations that are imprecise and are really subject to different interpretations,” according to a discussion of the proposed rules that appeared in the Federal Register.

The proposed rules also try to address possible loopholes in FCRA.

The officials who wrote the proposed rules are asking how they ought to address efforts to make indirect use of personal financial information. The officials ask specifically for comments about a life insurance company that asks a bank to include life insurance brochures in statements sent to customers who meet certain deposit criteria.

The officials also warn against moves by companies with several corporate names to send opt-out notices bearing the name of an affiliate that is unfamiliar to consumers. If a consumer does business with the ABC affiliate, the opt-out notice should come from ABC, not an affiliate or parent company with another name, the officials write.

One section of FCRA lets financial institutions ignore some privacy restrictions when consumers themselves ask for help.

But financial institutions can make only limited use of that exception, and affiliates cannot apply the exception to consumers who are simply returning the affiliates calls, officials write.


Reproduced from National Underwriter Edition, July 29, 2004. Copyright 2004 by The National Underwriter Company in the serial publication. All rights reserved.Copyright in this article as an independent work may be held by the author.