FTC "Red Flags" Rule

The Federal Trade Commission is focused on compliance with the "Red Flags" rule and to clarify which businesses are covered and what they must do to comply. The Red Flags Rule is an anti-fraud regulation which requires creditors and financial institutions with covered accounts to develop and implement Identity Theft Prevention Programs. The rule was developed by the FTC in accordance with the Fair and Accurate Credit Transactions Act of 2003 (FACTA). FACTA's definition of "creditor" includes any entity that regularly extends or renews credit, arranges for others to do so, or regularly permit deferred payments for goods or services. "Financial institutions" include entities that offer accounts that enable consumers to write checks or make payments to third parties through other means, such as other negotiable instruments.

The FTC offers resources to help entities determined if they are covered by the Red Flags Rule on their Website at www.ftc.gov/redflagsrule. It also includes an online compliance template that enables companies to design their own Identity Theft Prevention Program, as well as articles directed to specific industries, guidance manuals, and Frequently Asked Questions.

In addition, because many small and low-risk entities are unsure of their obligations under the Red Flag Rule, the Commission will also create a special link for such entities with materials that provide guidance and direction regarding the Rule. The Commission has already posted Frequently Asked Questions that address how the FTC intends to enforce the Rule at www.ftc.gov/bcp/edu/microsites/redflagsrule/faqs.shtm. The FAQs state that the Commission staff will be less likely to bring an enforcement action against entities who know their customers personally, perform services in or around their customer's homes, or operate in low-risk sectors and have not yet been the target of identity theft. Should you require assistance in understanding or meeting your Red Flags Rule obligations please contact us.


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Last updated 12-Nov-2015.