Identity Theft (the FACTA Red Flags Rule). The Red Flags” Rule was issued jointly by the FTC and the federal banking agencies. The rule requires “financial institutions” and “creditors” holding “covered accounts,” as defined in the Red Flags Rule, to develop and implement written programs designed to help to reduce the risk of identity theft. “Financial institutions” generally includes, banks, credit unions, or other entities holding transactions accounts of a consumer. “Creditor” generally means a business that uses a consumer report and that allows a consumer to defer payment for goods and services or bill its customers, grants or arranges credit, or participate in the decision to extend, renew, or set the terms of credit. For example, businesses that offer home or personal services on a recurring basis, (e.g. cleaning services, lawn services, or personal care services) that use consumer reports and defer billing the customer for services would likely be subject to these requirements. All companies covered by the rules are required to establish an Identity Theft Prevention Program to detect, prevent, and mitigate identity theft. Companies subject to the Red Flags Rule are required to establish and implement a program appropriate for the size of their business and the type of information stored in their systems. These written programs are supposed to identify the relevant “red flags” of identity theft including: 1) unusual account activity; 2) fraud alerts on a consumer report; and 3) attempted use of suspicious account application documents. More information on the Red Flags Rule and how to implement an appropriate identity theft program is available from the FTC website at Fighting Identity Theft with Red Flags Rule: A How-To Guide For Business . Regulation and Enforcement. The responsibility for issuing regulations related to the FCRA and GLBA and the enforcement of those regulations is shared by a number of federal agencies, and, in some cases, the ability to enforce the rules has been delegated to the attorneys general for the States. The authority to issue regulations for most federal consumer
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