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ID Red Flags Rule was created by the Federal Trade Commission, along with government agencies such as the NCUA, to require security practice and compliance to prevent identity theft.
This act was passed in January 2008, and was to be in place by November 1, 2008. But due to push backs by opposition; the new deadline was August 1, 2009. The two groups that this rule applies to are financial institutions and creditors.
Financial institution is defined as a state or national bank, a state or federal savings and loan association, a mutual savings bank, a state or federal credit union, or any other entity that holds a “transaction account” belonging to a consumer.
A “creditor” applies to any entity that regularly extends or renews credit, or arranges for others to do so, and includes all entities that regularly permit deferred payments for goods or services.
For example, if you are a law firm or an accounting firm, and you receive payment after your service is completed. Then you are considered a creditor. Another example is if you are a utility company. You provide the utilities and receive payment for your services rendered at the end of the month, rendering you a creditor.
There are many different companies that this rule applies to, this list includes, but not limited to: finance companies, automobile dealers, mortgage brokers, utility companies, telecommunications companies, medical practices, hospitals, and law firms; or any other such company that performs a service, then receives payment once the work is complete. Opposition has led to foot-dragging on the part of U.S. banks.
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