What is Red Flag

What is Red Flag

What is the Red Flags Rule?

The ‘Red Flags’ rule was created to help stop identity theft. The Federal Trade Commission (FTC), the National Credit Union Administration (NCUA), and the federal bank regulatory agencies, have issued regulations (the Red Flags Rule), as a part of the Fair and Accurate Credit Transactions Act (FACTA), that requires financial organizations and creditors to create written identity theft prevention programs.

As of May, 1, 2009 financial institutions must be able to recognize, detect, and respond to the patterns or specific activities associated with identity theft, also known as the red flags, and have policies in place. These organizations are required to have written programs that identify and detect the warning signs, as well as, have planned appropriate responses to prevent or manage the crime and updates to the program. The Red Flags Rule allows each organization to create a plan tailored to the size and needs of the specific institution.

Who must comply?

All financial institutions must comply with this act including but not limited to, state and national banks, state and federal credit unions and loan associations, and a mutual savings bank. Any creditor organization, which is one that regularly extends, renews, or continues credit or regularly arranges such actions.


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