New FTC Template May Help Low-Risk Entities Comply With the Red Flag Rules

Federal Trade Commission offers guidance for developing an identity theft prevention program. As technology use increases, it has become significantly easier to fraudulently access a consumer's bank account. In light of this, the Federal Trade Commission (FTC) implemented the Red Flags Rule under the Fair Credit Reporting Act to help mitigate identity theft among consumers.

The Red Flags Rule requires financial institutions and creditors to implement a written Identity Theft Prevention Program to detect the warning signs (“red flags”) of identity theft. By identifying red flags, these entities will be in a better position to spot an imposter trying to defraud them by using someone else's identity. The goal of implementing a Identity Theft Prevention Program is to help business and organizations detect, prevent and mitigate identity theft with regards to existing and new consumer accounts.

On May 13, 2009, the FTC released a template (see the following link - http://www.ftc.gov/bcp/edu/microsites/redflagsrule/RedFlags_forLowRiskBusinesses.pdf )that guides “low-risk” businesses in developing an identity theft prevention program to comply with the Red Flags Rule. Businesses that have personal contact with their customers, provide services at their customer's homes or have never experienced identity theft before are generally considered “low-risk” businesses. The FTC's template provides guidance and instructions enabling companies to complete and print the fill-in-the-blank form online.