October 30th, 2008
The Federal Trade Commission (FTC) announced that it will delay the enforcement of the "Red Flags Rule" until May 1, 2009, giving creditors and financial institutions additional time develop and implement written identity theft prevention programs.
The "Red Flags Rule" - developed pursuant to the Fair and Accurate Credit Transaction (FACT) Act and set to take effect Nov. 1 - requires financial institutions and creditors with "covered accounts" to implement identity theft prevention programs to identify, detect, and respond to patterns, practices, or specific activities that could indicate identity theft.
The FTC decided to temporarily suspend the enforcement of "Red Flag" regulations after its staff learned that some entities were unaware that they were engaged in activities that would cause them to fall under the FACT Act's definition of creditor or financial institution and, therefore, learned of the Rule's requirements too late to be able to satisfy compliance regulations by Nov. 1.
The Department of Education issued an electronic announcement on Oct. 14 to inform institutions that the "Red Flags Rule" applies to institutions participating in the Federal Perkins Loan Program. Colleges and universities may also qualify as a creditor with "covered accounts" if the institution participates as a school lender in the Federal Family Education Loan Program (FFELP), offers institutional loans to students, faculty, or staff, or offers an extended tuition payment plan throughout the semester instead of requiring full payment at the beginning of the semester.
The FTC's decision to grant a six-month forbearance period for enforcement will allow institutions and other entities confused by the legislation sufficient time to establish and implement appropriate identity theft prevention programs, in compliance with the Rule.
According to the "Red Flags Rule," colleges and universities that fall into the categories of financial institutions or creditors with "covered accounts" must create and implement a program for identity theft prevention that: