“Red Flags Rule” Enforcement Postponed

Businesses worried about compliance with new federally enforced identity theft preventive guidelines have been given another reprieve. According to a statement from the Federal Trade Commission, qualifying business won’t be required to abide by the so-called “Red Flags Rule” until Aug. 1. 

This is the second time the agency has postponed enforcement of the guidelines, originally intended to go into effect Nov. 1, 2008. Last year, the agency extended the deadline to May 1, 2009, but recent pushback from health care providers, many of whom don’t feel they should be under the rule’s jurisdiction, evidently inspired the agency to grant institutions even more time to develop related policies and procedures.

“Given the ongoing debate about whether Congress wrote this provision too broadly, delaying enforcement of the Red Flags Rule will allow industries and associations to share guidance with their members, provide low-risk entities an opportunity to use the template in developing their programs, and give Congress time to consider the issue further,” FTC Chairman Jon Leibowitz is quoted in an agency new release.

The Red Flags Rule asks credit-granting businesses to put in place systematic screening procedures based on 26 different warnings signs, or “red flags” that may be indicative of identity-related fraud—from the existence of a credit freeze or fraud alert on a consumer credit application to an applicant failing to be able answer basic questions about his or her own financial history. The regulations have their genesis in the Fair and Accurate Credit Transactions Act of 2003 (FACTA), which “directed financial regulatory agencies, including the FTC, to promulgate rules requiring ‘creditors’ and ‘financial institutions’ with covered accounts to implement programs to identify, detect, and respond to patterns, practices, or specific activities that could indicate identity theft,” according to the FTC.

Businesses wishing to learn more about the red flag rules can check out the recent Identity Theft 911 newsletter, Massachusetts' Battleground for Consumer Protection and visit these web sites set up by the FTC:

www.ftc.gov/bcp/edu/pubs/business/alerts/alt050.shtm

www.ftc.gov/redflagsrule