NAW has released a legal advisory concerning the "Red Flags Rule," which the Federal Trade Commission will start to enforce Nov. 1, 2009. The rule requires creditors and financial institutions to conduct a risk assessment to determine if they have "covered accounts," which include consumer-type accounts or other accounts for which there is a reasonable risk of identify theft.
If so, the creditor must develop and implement a written Identify Theft Prevention 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.
More information on the new rule is available at the National Association of Wholesaler-Distributors Web site.