Compiled and designed by Mark Fullbright , Certified Identity Theft Risk Management Specialist™ (CITRMS) as a free service for consumers and businesses to protect themselves online and reduce their exposure to identity theft. Stay Safe, Stay Secure *Resources: Federal Trade Commission

1. Red Flags Rule
Fighting Identity Theft with the
Red Flags Rule

2. Red Flags Rule
The Red Flags Rule was created by the Federal Trade Commission,
along with other government agencies such as the National Credit
Union Administration, to help prevent identity theft.
The rule was passed in January 2008, and was to be in place by
November 1, 2008. But due to push-backs by opposition, the FTC
delayed enforcement until December 31, 2010.
In December 2010, the Red Flags Rule was clarified by the Red Flag
Program Clarification Act of 2010 to exclude most doctors, lawyers,
and other professionals who do not receive full payment at the time
when their service is furnished.

3. Red Flags Rule
The Red Flags Rule was based on section 114 and 315 of the
Fair and Accurate Credit Transactions Act of 2003.
FACTA was put in place to help Identity Theft Prevention
and Credit History Restoration, Improvements in Use of
and Consumer Access to Credit Information, Enhancing the
Accuracy of Consumer Report Information, Limiting the
Use and Sharing of Medical Information in the Financial
System, Financial Literacy and Education Improvement,
Protecting Employee Misconduct Investigations, and
Relation to State Laws.

4. Financial Institutions
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

5. Creditors
FACTA’s definition of “creditor” applies to any entity that
regularly extends or renews credit – or arranges for others
to do so – and includes all entities that regularly permit
deferred payments for goods or services
The definition of a creditor was clarified by the Red Flag
Program Clarification Act of 2010. Under the Clarification
Act, a creditor regularly and in the course of business:
Obtains or uses consumer credit reports
Provides information to consumer reporting agencies
Advances funds which must be repaid in the future (or
against collateral).

6. Identity Theft Prevention Programs
The Red Flags Rule sets out how certain
businesses and organizations must develop,
implement, and administer their Identity Theft
Prevention Programs. The program must
include four basic elements, which together
create a framework to address the threat of
identity theft

7. The program has four elements:
Identify Relevant Red Flags:
Identify likely business-specific identity
theft red flags
Detect Red Flags:
Define procedures to detect red flags in
day-to-day operations
Prevent and Mitigate Identity Theft:
Act to prevent and mitigate harm when
red flags are identified
Update Program:
Maintain the red flag program, including
educating operational staff

8. 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.

9. The red flags fall into five categories:
Alerts, notifications, or warnings from a consumer reporting agency
Suspicious documents
Suspicious identifying information, such as a suspicious address
Unusual use of – or suspicious activity relating to – a covered account[
Notices from customers, victims of identity theft, law enforcement authorities, or
other businesses about possible identity theft in connection with covered accounts[

10. The Red Flags Rule is published at 16 C.F.R. '
681.1. See also 72 Fed. Reg. at 63,771
(11.9.2007).
http://www.ftc.gov/os/fedreg/2007/november/071109r
edflags.pdf.

11. Fighting Identity Theft with the Red Flags
Rule: A How-To Guide for Business
http://www.business.ftc.gov/documents/bus23fighting-identity-theft-red-flags-rule-how-guidebusiness

12. Compiled and designed by Mark Fullbright , Certified
Identity Theft Risk Management Specialist™ (CITRMS)
as a free service for consumers and businesses to
protect themselves online and reduce their exposure
to identity theft.
Stay Safe, Stay Secure
Resources: *Federal Trade Commission