What Is Red Flag Compliance?
In 2003, the Red Flags Rule was mandated as part of the Fair and Accurate Credit Transactions Act (FACTA). This act was implemented in response to a rise in identity theft claims, particularly within the lending industry. With these guidelines, the federal government requires creditors and financial institutions to implement a system of checks so that they may “identify, detect, and respond to patterns, practices, or specific activities that could indicate identity theft.”*
Who Does This Affect?
Red Flag compliance particularly relates to creditors and financial institutions. Some of the creditors specifically mentioned within this requirement include:
- Financial companies
- Automobile dealers
- Mortgage brokers
- Utility providers
- Telecommunications companies
- Nonprofit and government entities that defer payment for goods and services
Among the financial institutions cited for these rules, the FACTA requires organizations offering accounts that “enable consumers to write checks or to make payments to third parties through other means, such as other negotiable instruments or telephone transfers” to implement this identity theft prevention system as well.*
* See the Federal Trade Commission's “FTC Will Grant Six-Month Delay of Enforcement of ‘Red Flags' Rule Requiring Creditors and Financial Institutions to Have Identity Theft Prevention Programs” (published October 22, 2008).
How Does EVS Help?
Red Flag compliance involves a variety of system checks aimed at detecting specific “red flags” and preventing possible cases of identity theft. As part of a full Red Flag compliance package, a qualifying organization would have to incorporate a system that checks for:
- Alerts and other warnings generated by consumer reporting agencies/service providers
- Suspicious documentation
- Suspicious personal identifying information
- Suspicious account activity
- General notices regarding the possibility of identity theft in reference to the monitored accounts
EVS maintains an active role in the fight against identity theft by providing a valuable piece of this overall package. With our verification and authentication solutions, EVS can satisfy an organization's need for identifying suspicious personal information, thereby helping our clients remain vigilant against fraud while also performing satisfactory due diligence.