Agencies Issue Final Rules on Identity Theft Red Flags

The Federal Trade Commission and the federal financial institution regulatory agencies have published final rules on identity theft "red flags" and address discrepancies. The Final Rules implement sections 114 and 315 of the Fair and Accurate Credit Transactions Act of 2003.

The Final Rules require each financial institution and creditor that holds any consumer account, or other account for which there is a reasonably foreseeable risk of identity theft, to develop and implement an Identity Theft Prevention Program (Program) for combating identity theft in connection with new and existing accounts. The Program must include reasonable policies and procedures for detecting, preventing, and mitigating identity theft and enable a financial institution or creditor to:

1. Identify relevant patterns, practices, and specific forms of activity that are "red flags" signaling possible identity theft and incorporate those red flags into the Program;

2. Detect red flags that have been incorporated into the Program;

3. Respond appropriately to any red flags that are detected to prevent and mitigate identity theft; and

4. Ensure the Program is updated periodically to reflect changes in risks from identity theft.

The agencies also issued guidelines to assist financial institutions and creditors in developing and implementing a Program, including a supplement that provides examples of red flags. The Final Rules require users of consumer reports to develop reasonable policies and procedures to apply when they receive a notice of address discrepancy from a consumer-reporting agency.

The final rulemaking was issued by the Board of Governors of the Federal Reserve System, the Federal Deposit Insurance Corporation, the Federal Trade Commission, the National Credit Union Administration, the Office of the Comptroller of the Currency, and the Office of Thrift Supervision. The Final Rules are effective on January 1, 2008. Covered financial institutions and creditors must comply with the Rules by November 1, 2008.