The Red Flag Rule says that banks and other financial institutions as well as creditors with accounts that are 'covered' must have programs in effect that prevent theft of identity and that can identify when identity theft has occurred. These institutions must have plans in effect to show that they will respond to practices and patterns that indicate that identity theft is taking place.
The compliance of this rule is different from other similar financial compliance rules and adds more responsibilities and more penalties on a great many business segments. The 'covered account' wording in the Red Flag Rule is quite broad. A covered account is an account that is personal in nature that is set up for family or household spending and that involves itself in, or that is designed to allow multiple payments and/or transactions. A covered account also is an account that holds a risk to customers or to the safety of the financial institution or the creditor from identity theft.
Broadly speaking, the Red Flag Rule states that you must come up with a written program to deal with identity theft that involves detection, prevention, mitigation and response. The staff must be educated about the Red Flag Rule and it also states that the consumer is to be notified if an identity theft is suspected and that the proper authorities be notified.
Non-compliance of the Red Flag Rule result in the FTC being authorized to dish out penalties of no more than $2500 for each single violation. Companies are also responsible to pay no more than $1000 for each violation of the rule in addition to the federal penalties that are given for not complying.
Identity theft is a very big problem in the United States with literally hundreds of new cases coming to light each and every day. When a person has his identity stolen, it can totally disrupt his life. Bank accounts can be emptied, credit cards maxed out and personal reputations ruined. Identity theft is costly and more and more companies are making their employees and customers aware of this growing problem. Victims of identity theft are affected not only financially but personally as well. Being a victim of identity theft is a very trying ordeal and recovery is a long and painful process.
The Red Flag Rule is a great step in keeping identity theft to a minimum. This ruling was created to make companies more aware and more responsible when dealing with the personal information given to them by their customers. Non compliance is costly and could ruin a business. The Red Flag Rule may help to bring the number of identity theft cases down in the United States.
