FTC shoves identity theft rule deadline to year-end

FTC identity theft Red Flags Rule delayed yet again

Pestered by lawsuits and requests from congress the Federal Trade Commission said it will further delay the enforcement of its Red Flags identity theft protection rule to December 31, 2010, while Congress considers changes to legislation that could alter the rule's coverage areas.  The rule was to go into law June 1 and has been delayed many times since the original implementations date of Nov. 2008. 

In particular, the American Medical Association has sued the FTC to block the agency from subjecting physicians to the Red Flags rule.  The American Bar Association and the American Institute of Certified Public Accountants has also taken the FTC to court over the impending rules.  Problems tend to center around the FTC's definition of who is and who isn't a "creditor."

The rules have been delayed three times and were originally set to become practice Nov. 1, 2008.  

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Under the Red Flags rules all companies or services that regularly permit deferred payments for goods or services, including entities such as health care providers, attorneys, and other professionals, as well as retailers and a wide range of businesses that invoice their customers must develop a written program that identifies and detects the relevant warning signs - or red flags - of identity theft. These may include, for example, unusual account activity, fraud alerts on a consumer report, or attempted use of suspicious account application documents. The program must also describe appropriate responses that would prevent and mitigate the crime and detail a plan to update the program. 

The final rules require financial and credit institutions that hold 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 for combating identity theft in connection with new and existing accounts, the FTC said.

 The FTC stated that some industries and entities within the agency's jurisdiction were uncertain about their coverage under the Red Flags Rule. Many entities also argue that, because they generally are not required to comply with FTC rules in other contexts, they have not had enough time to develop compliance plans. Others have raised a stink about complying with the rules. 

There seems to be some frustration about the delay coming from the FTC though: "Congress needs to fix the unintended consequences of the legislation establishing the Red Flags Rule - and to fix this problem quickly. We appreciate the efforts of Congressmen Barney Frank and John Adler for getting a clarifying measure passed in the House, and hope action in the Senate will be swift," FTC Chairman Jon Leibowitz said. "As an agency we're charged with enforcing the law, and endless extensions delay enforcement."

Identity theft continues to lead the FTC's yearly look at consumer gripes but reports of the crime actually dropped  5% from 2008. 

Follow Michael Cooney on Twitter: nwwlayer8   

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