FTC Delays Enforcement of Red Flags Rule
WASHINGTON, D.C. — In order to clear up some confusion and allow creditors and financial institutions more time to implement their policies, the Federal Trade Commission announced Wednesday that it is pushing back the compliance deadline for the Red Flags Rule to May 1, 2009.
As most know, the original compliance deadline was Nov. 1.
That said, this delay does not apply to institutions whose compliance falls under other federal agencies' enforcement.
The Red Flags Rule was developed following the Fair and Accurate Credit Transactions Act of 2003 as a means to curb identity theft. Basically, the Red Flags Rule stipulated that financial institutions and creditors with covered accounts (including auto dealers) must have identity theft prevention programs in place.
However, according to an enforcement policy statement from the FTC, many of the industries and entities under the commission's jurisdiction expressed "confusion and uncertainty" about what the rule entailed and whom it governed.
"These entities indicated that they were not aware that they were undertaking activities that would cause them to fall within FACTA's definitions of ‘creditor' or ‘financial institution,'" officials explained in the statement.
The FTC also indicated that many institutions were either unaware of the rule or hadn't followed its progress, simply because they typically aren't mandated to comply with FTC regulations in other arenas.
As such, many learned of the rule too late to develop and implement a program by Nov. 1, officials explained.
"Given the confusion and uncertainty within major industries under the FTC's jurisdiction about the applicability of the rule, and the fact that there is no longer sufficient time for members of those industries to develop their programs and meet the Nov. 1 compliance date, the commission believes that immediate enforcement of the rule on Nov. 1 would be neither equitable for the covered entities nor beneficial to the public," the FTC stated.
"Delaying commission enforcement of the rule as to the entities under its jurisdiction by six months, until May 1, 2009, will allow these entities to take the appropriate care and consideration in developing and implementing their programs," the commission added. "It also will give the commission time to conduct additional education and outreach regarding the rule."
For more information, visit www.ftc.gov.