LOUISVILLE, Ky. (January 28, 2011) - The Red Flags Rule was developed in 2003 as part of the Fair
and Accurate Credit Transactions Act (FACTA). This act was aimed at combating
the rise in identity theft claims that were mounting particularly within the
lending industry.
With these
guidelines, the federal government requires creditors and financial
institutions to implement a system of checks so they may identify, detect, and
respond to patterns, practices, or specific activities that could indicate
identity theft.1
Where the Rule Stands
Today
After several pushbacks over the past couple of years,
the Red Flags Rule is now moving forward with an amendment geared toward clarifying
the law. On December 18, 2010, President Obama signed the Red Flags Program
Clarification Act, which limits the circumstances under which creditors are
covered by the Red Flags Rule. As part of clarifying the term creditor, the act points
to any organization that regularly and in the ordinary course of business
- obtains or uses consumer reports, directly or indirectly,
in connection with a credit transaction;
- furnishes information to consumer reporting
agencies in connection with a credit transaction; or
- advances funds to or on behalf of a person, based
on an obligation of the person to repay the funds or repayable from specific
property pledged by or on behalf of the person.
Per the same act, however, a creditor
does NOT include
a business that advances funds on behalf of a person for expenses incidental
to a service provided by the [business] to that person.2
With the passing of this law and the higher level of clarity in
defining the organizations responsible for complying with the Red Flags Rule,
the proactive penalty phase is now in effect. This means that any company that
falls under the Red Flags Act and doesn't have a Red Flag Program can be
penalized.
EVS: A Step in the
Right Direction
As part of becoming Red Flag-compliant, companies must
identify possible red flags, detect red flags, prevent identity theft by
monitoring their accounts, and mitigate identity theft by contacting affected
customers when necessary. Furthermore, compliant organizations must update their systems periodically to ensure they
are current and on point.3
EVS
maintains an active role in the fight against identity theft by providing a
valuable piece to an organizations overall Red Flags Rule compliance package.
With our id verification and id 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.
Our ID authentication and fraud prevention
solution provide the data that businesses need to form safer relationships
and comply with these specific federal requirements. Whether business owners
want to verify and authenticate the identities of their customers or add
necessary security measures to their software packages, EVS can help.