Red Flag Requirements
New ‘Red Flag’ Requirements Effective May 1, 2009
The original implementation date was Nov 1, 2008, but it was extended by the FTC
Identity thieves use people’s personally identifying information to open new accounts and misuse existing accounts, creating havoc for consumers and businesses. Financial institutions and creditors soon will be required to implement a program to detect, prevent, and mitigate instances of identity theft.
The Federal Trade Commission (FTC), the federal bank regulatory agencies, and the National Credit Union Administration (NCUA) have issued regulations (the Red Flags Rules) requiring financial institutions and creditors to develop and implement written identity theft prevention programs, as part of the Fair and Accurate Credit Transactions (FACT) Act of 2003. The programs must be in place by May 1, 2009, and must provide for the identification, detection, and response to patterns, practices, or specific activities – known as “red flags” – that could indicate identity theft.
Corporate Identity Protection
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The explosion of electronic data processing and transmittal as a daily part of business has dramatically increased the incidence of identity theft. More than 245 million Americans have had their personal information compromised since January 2005. Over thirty states have passed laws requiring that businesses notify consumers if their personal information in such businesses’ control has or may have been compromised. Failure to do so can result in severe civil and regulatory penalties, administrative expenses, legal liability and defense costs. |
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Mortgage Insurance Agency has solutions for Businesses of Any Size that are specifically designed to address most of these exposures. The policy offers coverage to the business for the following:
- Legal Liability Damages
- Defense Costs
- Regulatory Action Expense
- Notification Costs
Additional Coverage Features
Businesses are
understandably concerned with the civil liability they may face as a
result of identity theft based on the unauthorized release of client
information. Several lawsuits already have been filed and it is
possible that future settlements of these or other lawsuits will
make headlines and adversely affect corporate balance sheets.
Administrative
Expenses
In an increasingly regulated business
environment, any corporate entity that has experienced an
unauthorized release of client information may face administrative
actions brought by various regulatory bodies, including: the Federal
Trade Commission, federal banking agencies and state attorneys’
general.
Protecting Customers and Employees Alike
By providing
services for identity theft victims, a business demonstrates its
commitment to the needs of consumers. This demonstration of good
faith has proved to be a valuable asset in retaining customers,
maintaining employee satisfaction and preventing costly actions.