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- Definition:
- the Fair and Accurate Credit Transactions (FACT) act of 2003: financial institutions and some creditors are required to develop and implement a written Identity Theft Prevention Program. This is based on detecting the warning signs that may indicate identity theft. The Federal Trade Commission (FTC) and several other agencies enforce the Red Flags Rule.
- Who must comply?
- Financial institutions (all banks, savings associations, credit unions, and any other entity that holds a transaction account belonging to a consumer) and creditors (organizations that regularly grant loans, arrange for loans or the extension of credit or make credit decisions). Only creditors that have covered accounts must comply with the Red Flags Rule. Covered accounts include two categories: 1, consumer accounts, like credit card accounts, utility accounts, or mortgage loans. 2, any other account that the organization offers and maintains, like small-business accounts, sole-proprietor accounts, or single-action consumer accounts that maybe vulnerable to identity theft.
- What are the four basic steps in an Identity Theft Prevention Program?
- 1, identify the red flags relevant to your organization (irregular account activities, like using most of the available credit for cash advances, notifications from credit reporting companies or other agencies, like fraud alert, inconsistencies in personally identifiable information, like an invalid phone number or duplicate SSN, suspicious documents, like a fake ID or an application that looks torn up and put back together again). 2, follow identity verification and authentication procedures to detect red flags. 3, respond to detected red flags appropriately, depending on the degree of risk posed. 4, this program must be updated regularly
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