Privacy & Information Security Law Blog

On December 4, 2018, the Federal Trade Commission published a notice in the Federal Register indicating that it is seeking public comment on whether any amendments should be made to the FTC’s Identity Theft Red Flags Rule (“Red Flags Rule”) and the duties of card issuers regarding changes of address (“Card Issuers Rule”) (collectively, the “Identity Theft Rules”). The request for comment forms part of the FTC’s systematic review of all current FTC regulations and guides. These periodic reviews seek input from stakeholders on the benefits and costs of specific FTC rules and guides along with information about their regulatory and economic impacts.

In May 2013, the Federal Trade Commission released a new guide entitled Fighting Identity Theft with the Red Flags Rule: A How-To Guide for Business (the “Guide”) to help businesses and organizations determine whether they are subject to the FTC’s Red Flags Rule (“Red Flags Rule”) and how to meet the Rule’s requirements. The FTC’s Guide includes information regarding what types of entities must comply with the Red Flags Rule, a set of FAQs, and a four-step process to achieve compliance.

On November 30, 2012, the Federal Trade Commission announced the issuance of an interim final rule (“Interim Final Rule”) that makes the definition of “creditor” in the FTC’s Identity Theft Red Flags Rule (“Red Flags Rule”) consistent with the definition contained in the Red Flag Program Clarification Act of 2010.

On December 18, 2010, President Obama signed into law the “Red Flag Program Clarification Act of 2010” (S.3987), which amends the Fair Credit Reporting Act with respect to the applicability of identity theft guidelines to creditors.  The law limits the scope of the Federal Trade Commission’s Identity Theft Red Flags Rule (“Red Flags Rule”), which requires “creditors” and “financial institutions” that have “covered accounts” to develop and implement written identity theft prevention programs to help identify, detect and respond to patterns, practices or specific activities that indicate possible identity theft.

The “Red Flag Program Clarification Act of 2010” (S. 3987) has passed the Senate.  The legislation would limit the scope of the Red Flags Rule, which requires certain “creditors” to develop and implement written identity theft prevention programs to help identify, detect and respond to patterns, practices or specific activities that indicate possible identity theft.  The new legislation would exclude from the definition of “creditor” certain entities that “[advance] funds on behalf of a person for expenses incidental to a service provided by the creditor to that ...

On November 17, 2010, Representative John Adler (D-NJ) introduced the Red Flag Program Clarification Act of 2010 (H.R. 6420) to “amend the Fair Credit Reporting Act with respect to the applicability of identity theft guidelines to creditors.”  The bipartisan bill seeks to limit the scope of the FTC’s Identity Theft Red Flags Rule, which requires “creditors” and “financial institutions” that have “covered accounts” to develop and implement written identity theft prevention programs to help identify, detect and respond to patterns, practices or specific activities that indicate possible identity theft.

As reported in BNA’s Privacy Law Watch, the Federal Trade Commission intends to agree to temporarily exempt health care providers from the FTC’s Identity Theft Red Flags Rule.  The Red Flags Rule implements Sections 114 and 315 of the Fair and Accurate Credit Transactions Act.  In relevant part, the Rule requires creditors and financial institutions that offer or maintain certain accounts to implement an identity theft prevention program.  The FTC previously has stated that health care providers could be deemed “creditors” under the Rule.  The agreement will grant relief to ...

On May 28, 2010, the FTC announced that it would again delay enforcement of the Identity Theft Red Flags Rule.  This is the fifth time the Commission has announced an extension of the enforcement deadline, after most recently extending the deadline to June 1, 2010.  The Red Flags Rule requires “creditors” and “financial institutions” that have “covered accounts” to develop and implement written identity theft prevention programs to help identify, detect and respond to patterns, practices or specific activities – known as “red flags” – that could indicate ...

On February 25, 2010, the Federal Trade Commission filed a notice that it is appealing the D.C. District Court’s December 28, 2009 judgment in favor of the American Bar Association in American Bar Association v. FTC.  The District Court’s summary judgment held that the FTC’s Identity Theft Red Flags Rule (“Red Flags Rule” or the “Rule”) does not apply to attorneys or law firms.  The Rule implements Sections 114 and 315 of the Fair and Accurate Credit Transactions Act.  In relevant part, the Rule requires creditors and financial institutions that offer or maintain certain ...

The FTC today announced that it would, for the fourth time, delay enforcement of the Identity Theft Red Flags Rule.  The enforcement date is now June 1, 2010 for creditors and financial institutions subject to FTC jurisdiction.  The agency stated that the delay was requested by members of Congress, who are currently considering a bill that would limit the rule's scope.  That bill (which would exclude certain entities with 20 or fewer employees from the rule's definition of "creditor" and also would provide a mechanism for other entities to apply for that exclusion) recently passed the ...

It is being reported that the U.S. District Court for the District of Columbia agreed this morning with the American Bar Association's argument that the FTC's Identity Theft Red Flags Rule ("Red Flags Rule" or the "Rule") does not apply to lawyers.  The Rule implements Section 114 and 315 of the Fair and Accurate Credit Transactions Act (the "FACT Act").  In relevant part, the Rule requires creditors and financial institutions that offer or maintain certain accounts to implement an identity theft prevention program.  The program must be designed to detect, prevent, and mitigate the risk of identity theft. The FTC has interpreted the definition of "creditor" broadly.  The Commission has taken the position in publications and numerous panels that lawyers and law firms meet the definition of creditor because they allow clients to pay for legal services after the services are rendered.  For law firms (as well as for other entities that the FTC deems subject to its enforcement jurisdiction), November 1, 2009 is the deadline for compliance with the provisions of the Rule that require implementation of an identity theft prevention program.

The November 1st deadline for compliance with the FTC’s Red Flags Rule Identity Theft Prevention Program requirements is rapidly approaching.  Of late, there has been a flurry of activity aimed at limiting the scope of the rule.  The Red Flags Rule, which was jointly promulgated by several federal agencies in November 2007, requires all “creditors” that offer or maintain a “covered account” to implement a written identity theft prevention program.  A “creditor” is defined broadly to include “any person who regularly extends, renews, or continues credit.”  In March 2009, the Federal Trade Commission (“FTC”) published a how-to guide for businesses to comply with the Red Flags Rule that confirmed the FTC will broadly construe the rule, stating that the definition of a “creditor” includes all businesses that “provide goods or services and bill customers later.”

On July 29, 2009, the Federal Trade Commission ("FTC") announced another three-month delay in the enforcement of the provision of Identity Theft Red Flags and Address Discrepancies Rule (the "Rule") that requires creditors and financial institutions to implement an Identity Theft Prevention Program.  The FTC noted that small businesses and entities with a low risk of identity theft remain uncertain about their obligations under the Rule and pledged to "redouble" its efforts to educate businesses about compliance with the Rule.  The new enforcement deadline for creditors and ...

On May 13, 2009, the Federal Trade Commission ("FTC") published a compliance template designed to assist financial institutions and creditors "at low risk for identity theft " in developing the Identity Theft Prevention Program required by the FTC’s Identity Theft Red Flags and Address Discrepancies Rule (the "Rule").  The template is entitled "A Do-It-Yourself Prevention Program for Businesses and Organizations at Low Risk for Identity Theft."

At the eleventh hour, the Federal Trade Commission announced that it will once again delay enforcement of the Red Flags Rule.  The Red Flags Rule was promulgated pursuant to the Fair and Accurate Credit Transactions Act of 2003 ("FACTA").  The previous compliance date was May 1, 2009, which was an extension from the original deadline of November 1, 2008.  The new extension applies only to the provisions of the Rule requiring financial institutions and creditors to implement an identity theft prevention program.  The continuing enforcement delays respond to ongoing uncertainty about ...

On March 20, 2009, the Federal Trade Commission (“FTC”) published its long-awaited guide to the Red Flags Rule (the “Rule”), entitled “Fighting Fraud with Red Flags Rule:  A How-To Guide for Business.”  The guide applies to creditors and certain financial institutions (such as state-chartered credit unions and mutual funds that offer accounts with check-writing privileges) that are subject to the FTC’s jurisdiction and addresses the provision of the Rule that requires implementation of an Identity Theft Prevention Program.  For entities subject to the FTC’s jurisdiction, the relevant compliance deadline is May 1, 2009.  Financial institutions that are regulated by federal bank regulatory agencies or the National Credit Union Administration (which issues their own versions of the Red Flags Rule) were required to comply with the Rule as of November 1, 2008.

On March 20, 2009, the Federal Trade Commission published a Red Flags Rule compliance guide for businesses, entitled “Fighting Fraud with the Red Flags Rule.”  The guide offers an overview of the Rule and practical steps businesses need to take to comply.  In addition, the guide addresses the issue that has raised the most concern among businesses -- the Rule's scope.  As expected, the FTC is interpreting the Rule broadly, suggesting, for example, that any company that sells goods or services and bills customers later is a "creditor" subject to the Rule.  According to the guide ...

Massachusetts recently announced that it is extending the deadline for compliance with new state data security regulations. In consideration of the current economic climate, Massachusetts has extended its original compliance deadline of January 1, 2009. The new compliance deadline will be phased in. By May 1, 2009, companies that are subject to the regulations must generally comply with the new standards and must contractually ensure the compliance of their third-party service providers. In addition, by May 1, 2009, covered businesses must encrypt laptops containing personal information. By January 1, 2010, companies are required to have a written certification of compliance from their third-party service providers and must encrypt other company portable devices, such as memory sticks and PDAs.