Red Flags Rule: What is the Red Flags Rule?

What is the Red Flags Rule? Who has to follow it? Who’s enforcing it? There are a lot of questions regarding this law, but it’s fairly simple once it’s broken down into bite sized pieces. In this four piece series we’ll cover: Basic questions about the Red Flags Rule, who needs to follow it, how to create your plan to follow the Red Flags Rule, and finally, how to implement your plan.

In this post we’ll be covering some basic questions about the Red Flags Rule.

Who?

The Red Flags Rule is a national law was created and enforced by the Federal Trade Commission (FTC), the National Credit Union Administration, and several other federal bank regulators. All businesses that operate as a financial institution or a creditor need to comply with this law. Financial institutions and creditors, as stated on the FTC’s site, are defined as:

• Financial Institutions: All banks, savings associations, and credit unions, regardless of whether they hold a transaction account belonging to a consumer; and anyone else who directly or indirectly holds a transaction account belonging to a consumer.
• Creditors: Those who regularly, and in the ordinary course of business, meet one of three general criteria:
  • Obtain or use consumer reports in connection with a credit transaction;
  • furnish information to consumer reporting agencies in connection with a credit transaction; or
  • advance funds to — or on behalf of — someone, except for funds for expenses incidental to a service provided by the creditor to that person.

What?

What exactly is the Red Flags Rule? It’s a program all financial institutions and creditors need to create and utilize to detect early warning signs (a.k.a., “red flags”) of Identity Theft. There is no set plan for every business to follow; businesses are required to create and implement their own plans.

When?

The Red Flags Rule was first developed in November of 2007, has been constantly revised and revisited. The most recent revision was in late 2010.

Where?

It is a Federal law so the Red Flags Rule applies to everyone in the United States.

Why?

The methods of identity thieves are changing constantly, therefore the law is constantly being revised. Identity theft is becoming increasingly problematic for Americans. By creating a Red Flags Rule program, businesses can better watch out for the early warning signs of identity theft and can better protect their customers.

Check out the rest of Burris’ Red Flags Rule Series.

Does your business have a Red Flags Rule program?

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Related posts:

Red Flags Rule: Do I need a Red Flags Rule Program? Red Flags Rule: How Do I Create A Red Flags Rule Program? Red Flags Rule: How Do I Implement My Red Flags Rule Program? Weekly Round-Up: Green Offices, Red Flags Rule, and More!