Understanding the New Federal Red Flag Rules and How They Can Help You Avoid ID Fraud
Identity thieves are in for hard grind this year as regulators are working overtime to make sure that your personal details cannot be stolen. Thanks to new "red flag rules," whose main objective is to impede identity thieves, fraud cases are going to reduce.
Consumers are not really aware of the red flag rules so first thing that need to be done is the education for consumers.
Red flag rules
The main objective of red flag rules is to push financial institutions in ensuring that they follow full security procedures. According to this rule, financial institutions and creditors should come up with a written identity theft prevention program in order to detect and prevent identity theft in link with the opening of few accounts or existing accounts.
The intriguing part about red flag rules is that it provides 26 examples of suspicious behavior that financial institutions and creditors can employ in terms of guidelines. Example of potential red flags includes presentation of modified documents and a fraud alert on a credit report.
The main concept of red flag rules is to prompt financial institutions and creditors to go into authentication mode. Another feature of this rule is the evaluation of the fact that whether fraudsters are trying to apply for credit on your name or are interested in hijacking the bank account of someone else.
Stem from the 2003 Fair and Accurate Credit Transactions Act, financial institutions are given a time till this November to come into full compliance of red flag rules. They are subjected to penalties by not implementing red flag rules. Most of the experts feel that flag rules are going to standardize how credit-issuing entities react to fraudulent activities.
The best part about red flag rules is that they offer a uniform road map for protecting customer information. It also comes in handy in terms of preventing identity theft. Before red flag rules, there was only an implied obligation when it comes to protecting details. This is not the case anymore as financial institutions and creditors now need to update their programs peon a periodic basis in order to make sure that they depict modifications in risks to protect customers from identity fraud. Simply put, the program must remain pliable enough so that new threats can be handled with utmost ease.
Who do the rules apply to?
According to FTC, the red flag rules are applicable to financial institutions and creditors that provide or maintain covered accounts. It is worthwhile pointing that red flag rules is applicable to financial institutions and creditors such as banks, credit unions, auto dealers, mortgage brokers, utility companies and telecommunications companies. Red flag rules are not implemented on credit reporting agencies. The main advantage of red flag rules is that banks and creditors whose fraud prevention programs are not up to the mark are going to be exposed by litigation and negative publicity. Another good thing about this rule is that staff members are going to be more careful in spotting identity fraud.
There is no denying the fact that this rule provides businesses the flexibility to design a program that is ideally suited for their business model. However, few creditors and financial institutions are not that pleased when it comes to the added financial and bureaucratic burden of following the rules.