Red Flags Rule

Question 1

What act authorized the Red Flags Rule?

Answer 1

Fair and Accurate Credit Transaction Act of 2003 (FACTA).

Question 2

What is a creditor?

Answer 2

A creditor includes any business that:

• Obtains and/or uses a consumer report in connection with a credit transaction
• Furnishes information to consumer reporting agencies, or
• Advances funds to or on behalf of a person that promises to repay the funds or to repay them from specific property pledges by or on behalf of the person

Question 3

What is the Red Flags Rule?

Answer 3

Rule that states all covered financial institutions and creditors must implement a written identity theft prevention plan, which must be approved by the entity’s board of directors or senior-level management.

Question 4

Whats policies and procedures must the Red Flags Rule include?

Answer 4

• Identify red flags and incorporate them into the plan
• Detect red flags as identified in the plan
• Respond once a red flag is identified in relation to a covered account
• Update the plan periodically

Question 5

What are some examples red flags?

Answer 5

• Fraud alerts on a credit report
• Active duty alerts on a credit report
• Address discrepancies on a credit report
• Inconsistencies in a credit report
• Documents that appear to be altered or forged
• Suspicious identification documents, such as:
• Photos which do not match the person presenting the I.D., or
• Identification documents which contradict other identification documents presented
• An application that is incomplete or looks altered, forged, or reassembled after destruction
• Inconsistencies with Social Security Number
• Multiple uses of the same phone number, address, or Social Security Number
• Invalid addresses or P.O. boxes
• Inconsistent information presented by the borrower
• Notification that the borrower is not receiving mail or that there have been unauthorized transactions on the account