What is the Red Flags Rule?
The Red Flags Rule was issued in 2007 under Section 114 of the Fair and Accurate Credit Transaction Act of 2003 (FACT Act), Pub. L. 108-159, amending the Fair Credit Reporting Act (“FCRA”), 15 U.S.C. 1681m(e).
The Red Flags Rule tells you how to develop, implement, and administer an identity theft prevention program. The essential components of an identity theft prevention program must include policies to identify potential "red flags," which are suspicious behaviors or activities indicating possible identity theft. It should also feature detection mechanisms for these red flags, specified actions to take upon their detection, and a strategy for regularly updating the program to address new threats.
Merely documenting a program is insufficient; it must be integrated into daily operations. The Rule allows businesses to tailor their programs based on their size and the level of identity theft risk they face, ranging from comprehensive measures for high-risk businesses to streamlined approaches for those at lower risk. Furthermore, the importance of securing customer data is emphasized, along with the necessity of implementing data security practices and remaining vigilant for signs of fraud. This dual approach aims to effectively combat identity theft by safeguarding personal information and identifying fraudulent activities.
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