The Federal Trade Commission has suspended enforcement of the Red Flag Rule until May 1, 2009, to give financial institutions and creditors more time to develop their identity theft protection plans. The Red Flag Rule was established as part of the 2003 Fair and Accurate Credit Transactions (FACT) Act.
The Rule was intended to protect consumers from identity theft by requiring that financial institutions and creditors develop procedures for confirming applicants’ identities, responding to suspected identity theft, and train their employees in the newly developed procedures.
The extension was granted in response to continuing confusion regarding who has to be in compliance, with most people assuming the Rule applied only to credit card issuers and financial institutions. In fact, according to federal law, a creditor is “any entity that regularly extends, renews or continues credit; any entity that regularly arranges for the extension, renewal or continuation of credit; an assignee of an original creditor who is involved in the decision to extend, renew or continue credit.”
It has taken many by surprise to learn that the Rule applies to doctors, car dealers, utility companies, cell-phone companies and any nonprofit or government entities that defer payment for goods or services.
In the mean time, consumers can’t rely on creditors of any kind to take reasonable steps to protect their customers’ identities.
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