Red Flags Rule Finally Begins June 1, 2010

May 28, 2010

On June 1, the Federal Trade Commission (FTC) will finally begin enforcing its "red flags" regulations. The FTC had previously delayed enforcement of the rule several times to allow "creditors" (as defined) and financial institutions time to develop and implement identity theft prevention programs and train staff and employees.

The regulations require financial institutions and "creditors" to address the risk of identity theft of customers and clients. The Red Flags Rule requires covered entities to develop and implement written identity theft prevention programs to help identify, detect, and respond to patterns, practices, or specific activities known as "red flags" — that could indicate identity theft.

A "creditor" is defined as any person or business that regularly extends, renews, or continues credit; or any person or business that regularly arranges for the extension, renewal, or continuation of credit. A "covered account" is an account that a financial institution or "creditor" offers or maintains, primarily for personal, family, or household purposes that involves multiple payments, such as a credit card account, mortgage loan, automobile loan, cell phone account, utility account, etc.

In addition to traditional financial institutions, businesses such as healthcare facilities, long term care and nursing homes, funeral homes, and automobile dealers are subject to the Red Flags Rule.

If you should have any question on whether or not your organization is a "creditor" and as such, covered and required to comply with the regulations, contact SESCO management Consultants.

SESCO Clients can request a free white paper providing staff recommendations for compliance. SESCO has authored an Administrative manual for 55.00. SESCO also offers policy development and required onsite training of employees and staff.

You may contact us at www.sescomgt.com or by phone at 423-764-4127.