Identity theft: Red Flags Rule deadline looms for Aug. 1

Editor's Note: The Federal Trade Commission announced on July 29 that it is again postponing the enforcement date of its Red Flags rule to Nov. 1, 2009. For more coverage of the announcement click here.

Washington -- As the deadline nears to implement Federal Trade Commission's identity theft rules, federal agencies issued a set of frequently asked questions to help affected businesses, such as veterinary practices, comply.

The questions provide guidance on numerous aspects of the rules, including which types of entities and accounts are covered, establishment and administration of an Identity Theft Prevention Program, address validation requirements applicable to card issuers and the obligations of users of consumer reports upon receiving a notice of address discrepancy.

The FTC also developed a Web site, www.ftc.gov/redflagsrule, with additional resources and guidance for creditors and financial institutions that are within its jurisdiction.

Identity Theft Prevention Programs must include four basic elements: Reasonable policies and procedures to identify the "red flags" of identity theft you may run across in day-to-day operations; the program must be designed to detect the red flags identified; it must spell out appropriate actions to be taken when red flags are detected and it must address how the program will be re-evaluated periodically to reflect new risks that arise.

The "Red Flags and Address Discrepancy Rules," in effect since January 2008, become mandatory Aug. 1. They implements sections of the Fair and Accurate Credit Transactions Act of 2003, which requires financial institutions and creditors to develop and implement written identity-theft prevention plans and requires issuers of credit cards and debit cards to assess the validity of notifications of changes of address.

The rules also provide guidance for users of consumer reports regarding reasonable policies and procedures to employ when consumer reporting agencies send them notices of an address discrepancy.

The Federal Reserve System, Federal Deposit Insurance Corp., National Credit Union Administration, Office of the Comptroller of the Currency, Office of Thrift Supervision and Federal Trade Commission all collaborated on the rules.