We Need to Know About Red Flag Compliance

By Carolyn Roome

This Act was created and passed by Federal Trade Commission and the National Credit Union Administration. This Act is call the Red Flag 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.

The Red Flag Rules were made to protect our information and also keep identity theft from happening. Finding identity theft earlier, and taking proactive steps to stop the damage, this should lessen financial losses to these organizations and protect the consumer from becoming victims. It also places more burdens on the institutions implementing this program but will pay off in the long run. The company boardmembers must approve the identity theft prevention program and thereafter be involved directly, or through a designated senior management employee, in the oversight, development, implementation and administration of the program. In addition, the company must assign specific responsibility for implementation, train staff, audit compliance, generate annual reports and oversee anyone granted access to covered accounts.

Who do the rules apply to?

The FTC says that financial institutions and creditors that offer or maintain covered accounts must implement a red flag rule program. Red flag rules apply to financial institutions and creditors like banks, credit unions, auto dealers, mortgage brokers, utility companies and telecommunications companies. Credit reporting agencies are exempt from the red flag rules, but at least one, Experian, is getting involved at some level. Experian hosted a red flag rules Web seminar in February that attracted more than 700 clients.

The Red Flags they are using for our protection are: Alerts, notifications or other warnings received from consumer reporting agencies, notices from consumers, victims of identity theft or law enforcement officers, suspicious documents such as forgeries or a photo description that does not match a person, suspicious personally identifying information (e.g., inconsistent or mismatched addresses, Social Security numbers, etc.); and other events that indicate a likelihood of an occurrence of identity theft.

The flags that are known in the identity theft prevention program must: Identify red flags requires review of the types of accounts offered and maintained, the methods used to open and provide access to the accounts, and any previous experience with identity theft.

Detect red flags requires obtaining identifying information about, and verifying the identity of, persons opening covered accounts and having a process to authenticate customers, monitor their transactions and verify the validity of change-of-address requests.

Respond to red flags requires appropriate responses that prevent and mitigate identity theft. Examples include monitoring covered accounts for evidence of identity theft, contacting the consumer, changing passwords or security codes, refraining from collecting on an account or selling it to a debt collector, or notifying law enforcement.

From what I see here we are getting protection from Identity theft but are paying the price of having every purchase and credit inquiry looked at, we are losing some of our privacy in order to be protected from this problem. In all I think they are trying to fix the problem and keep the financial institutions and us as a consumer lastly, from being victims from this wide spread problem. We need to look for that little red flag starting November 1, 2008 and use those companies and institutions that are compliant with this Act.

For those companies that would like more information, such as mortgage brokers and any small company that takes credit. Please call me for more information.

Carolyn Roome
303-816-7112
http://getyourlifebackonline.com
http://mountaingirlllc.com
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