San Diego, CA -
Identity thieves use people's personally identifying information
to open new accounts and misuse existing accounts, creating
havoc for consumers and businesses. Financial institutions and
creditors soon will be required to implement a program to
detect, prevent, and mitigate instances of identity theft.
The Federal Trade Commission (FTC), the federal bank regulatory
agencies, and the National Credit Union Administration (NCUA)
have issued regulations (the Red Flags Rules) requiring
financial institutions and creditors to develop and implement
written identity theft prevention programs, as part of the Fair
and Accurate Credit Transactions (FACT) Act of 2003. The
programs must be in place by November 1, 2008, and must provide
for the identification, detection, and response to patterns,
Practices, or specific activities -- known as "red flags" --
that could indicate identity theft.
Who must comply with the Red Flags Rules?
The Red Flags Rules apply to "financial institutions" and
"creditors" with "covered accounts."
Under the Rules, a financial institution is defined as a state
or national bank, a state or federal savings and loan
association, a mutual savings bank, a state or federal credit
union, or any other entity that holds a "transaction account"
belonging to a consumer. Most of these institutions are
regulated by the Federal bank regulatory agencies and the NCUA.
Financial institutions under the FTC's jurisdiction include
state-chartered credit unions and certain other entities that
hold consumer transaction accounts.
A transaction account is a deposit or other account from which
the owner makes payments or transfers. Transaction accounts
include checking accounts, negotiable order of withdrawal
accounts, savings deposits subject to automatic transfers, and
share draft accounts.
A creditor is any entity that regularly extends, renews, or
continues credit; any entity that regularly arranges for the
extension, renewal, or continuation of credit; or any assignee
of an original creditor who is involved in the decision to
extend, renew, or continue credit. Accepting credit cards as a
form of payment does not in and of itself make an entity a
creditor. Creditors include finance companies, automobile
dealers, mortgage brokers, utility companies, and
telecommunications companies. Where non-profit and government
entities defer payment for goods or services, they, too, are to
be considered creditors. Most creditors, except for those
regulated by the Federal bank regulatory agencies and the NCUA,
come under the jurisdiction of the FTC.
A covered account is an account used mostly for personal,
family, or household purposes, and that involves multiple
payments or transactions. Covered accounts include credit card
accounts, mortgage loans, automobile loans, margin accounts,
cell phone accounts, utility accounts, checking accounts, and
savings accounts. A covered account is also an account for which
there is a foreseeable risk of identity theft - for example,
small business or sole proprietorship accounts.
Complying with the Red Flags Rules
Under the Red Flags Rules, financial institutions and creditors
must develop a written program that identifies and detects the
relevant warning signs -- or "red flags" -- of identity theft.
These may include, for example, unusual account activity, fraud
alerts on a consumer report, or attempted use of suspicious
account application documents. The program must also describe
appropriate responses that would prevent and mitigate the crime
and detail a plan to update the program. The program must be
managed by the Board of Directors or senior employees of the
financial institution or creditor, include appropriate staff
training, and provide for oversight of any service providers.
How flexible are the Red Flags Rules?
The Red Flags Rules provide all financial institutions and
creditors the opportunity to design and implement a program that
is appropriate to their size and complexity, as well as the
nature of their operations. Guidelines issued by the FTC, the
federal banking agencies, and the NCUA (ftc.gov/opa/2007/10/redflag.shtm)
should be helpful in assisting covered entities in designing
their programs. A supplement to the Guidelines identifies 26
possible red flags. These red flags are not a checklist, but
rather, are examples that financial institutions and creditors
may want to use as a starting point. They fall into five
alerts, notifications, or warnings from a consumer reporting
suspicious personally identifying information, such as a
unusual use of -- or suspicious activity relating to -- a
covered account; and
notices from customers, victims of identity theft, law
enforcement authorities, or other businesses about possible
identity theft in connection with covered accounts.
More detailed compliance guidance on the Red Flags Rules will be
forthcoming. For questions about compliance with the Rules, you
may contact RedFlags@ftc.gov.
The FTC, the nation's consumer protection agency, works to
prevent fraudulent, deceptive, and unfair business Practices in
the marketplace and to provide information to help consumers
spot, stop, and avoid them. To file a complaint or to get free
information on consumer issues, visit
www.ftc.gov or call toll-free,
1-877-FTC-HELP (1-877-382-4357); TTY: 1-866-653-4261. The FTC
enters Internet, telemarketing, identity theft, and other
fraud-related complaints into Consumer Sentinel, a secure online
database available to hundreds of civil and criminal law
enforcement agencies in the U.S. and abroad.
Your Opportunity to Comment
The National Small Business Ombudsman and 10 Regional Fairness
Boards collect comments from small businesses about federal
compliance and enforcement activities. Each year, the Ombudsman
evaluates the conduct of these activities and rates each
agency's responsiveness to small businesses. Small businesses
can comment to the Ombudsman without fear of reprisal. To
comment, call toll-free 1-888-REGFAIR (1-888-734-3247) or go to
About the ICFE:
The Institute of Consumer Financial Education (ICFE) was founded in 1982 by the late Loren Dunton (creator of the Certified Financial Planner (CFP) designation). The ICFE is dedicated to helping consumers of all ages to improve their spending, increase savings and use credit more wisely.
The ICFE is an award winning, nonprofit, consumer education organization that has helped millions of people through its education programs and Resources. It publishes the Do-It-Yourself Credit File correction Guide, which is updated annually. The ICFE has distributed over one million Credit/Debit Card Warning Labels and Credit/Debit Card Sleeves world wide.
The ICFE became an official partner with the Department of Defense/Financial Readiness Campaign in June of 2004.The ICFE was an active partner in the California Student Debt Resource Awareness Project (CASDRAP) which resulted in a new web site: (studentdebthelp.org). CASDRAP disbanded in 2010, shortly after the web site project was completed. In 2011 the ICFE assumed the single sponsorship of the (studentdebthelp.org) web site and is now responsible for its content and operation.
The ICFE is also an on-line help for consumers who spend too much. ICFE's spending help was featured in PARADE Magazine in the Intelligence Report section. The money helps and tips are from the ICFE's Money Instruction Book, our course in personal finance.
Visit the ICFE's other web sites at: www.financial-education-icfe.org and studentdebthelp.org. Both sites helps consumers and students with mending spending, learning about the proper use of credit, budget and expense guidelines, how to set up and implement a spending-plan and also how to access financial education courses and how to teach children about money. Other ICFE services include: Ask Mr. G, a free eNews, and an online resource center for students, parents and educators, plus financial education learning tools and a book store.