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Red Flags Rule Compliance

FTC Red Flags Rule ComplianceThe FTC's enforcement of the Red Flags Rule began 1/1/2011. Are you compliant?

The Avantus Red Flags Report can help get your business compliant now by automatically detecting the deceptive practices and actions commonly indicating indentity theft.

Frequently Asked Questions


What is the Red Flags Ruling?

The federal banking agencies, the National Credit Union Administration (NCUA) and the Federal Trade Commission (FTC) have a requirement – called the "Red Flags Rule" – for creditors and financial institutions to assess whether they offer or maintain accounts covered under the rule and if they do, to develop and implement an "Identity Theft Prevention Program" (Program) to detect, prevent and mitigate identity theft with respect to those accounts.

When do I have to be compliant with the Red Flags Rule?

The FTC began enforcement of the Red Flags Ruling on January 1, 2011. Your business should be in compliance now.

What I have to do to be compliant with the Red Flags Rule?

Step 1: According to the federal banking agencies, the National Credit Union Administration (NCUA) and the Federal Trade Commission (FTC), you must have a written program in place that is adopted by your organization.

Step 2: You must also have a method in place for detection of Identity Theft Red Flags. Our Red Flags Report can be run with each credit report from within the Avantus ordering system.

Am I considered a "creditor?"

The term "creditor" has the same meaning as under the Equal Credit Opportunity Act (ECOA) and is defined as a person who regularly participates in credit decisions, including, for example, a mortgage broker, a person who arranges credit or a servicer of loans who participates in "workout" decisions. The term "credit" is defined, as in the ECOA, as the right granted by a creditor to defer payment for goods or services. It is important to note that commercial, as well as consumer, credit accounts may be covered by the Red Flags Rule.

I am an auto dealer. Does the Red Flags Rule apply to me?

If the business extends auto credit to consumers or arranges auto credit for consumers, the Rule may apply.

I service residential mortgage loans. Do I offer or maintain covered accounts?

Residential mortgage loans are covered accounts, and as a servicer you may be considered to be "maintaining" such accounts. If you are considered to be a creditor, such as by regularly participating in credit decisions, then you are subject to the Rule. If you do not regularly participate in credit decisions, you are not subject to the Red Flags Rule; however, you may have contractual duties imposed upon you by the lenders for which you provide services that are related to their Programs.

What is required in an Identity Theft Red Flags Program?

According to the Red Flags Ruling, a Program must be written, must be approved and implemented by the board of directors or senior management, and must include staff training and oversight of service providers. The board of directors or senior management should assign specific responsibility for implementation of the Program, should review reports by staff and should approve material changes to the Program. Staff should report to the board of directors or senior management at least annually on (1) the effectiveness of the Program's policies, (2) service provider arrangements, (3) significant security incidents and (4) any recommendations for material changes.

View a sample Identity Theft Red Flags Program.

What product does Avantus offer to help keep me in compliance with the Red Flags Rule?

Avantus offers the Red Flags Report – a comprehensive solution that can be implemented as part of your Red Flags Program or as a standalone program. The Avantus Red Flags Report searches thousands of data sources with billions of records, from credit and retail cards to mortgages and auto loans, giving you the power to reduce fraud and lower associated operational costs.

If you would like more information, or if you are already an Avantus customer and you would like to begin ordering the Red Flags Report, simply let us know by e-mail or call us at 800.243.0120.