What Is the Red Flags Rule?
The Red Flags Rule (RFR) is a set of federal laws in the United States that requires some businesses and organizations to develop and implement written plans to protect consumers from identity theft. Any creditor or financial institution that allows a covered account must implement a plan for the red flag rules.
Red flag rule
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- Chinese name
- Red flag rule
- Foreign name
- RFR, Red Flags Rule
- Category
- legal
- Area
- United States
- The Red Flags Rule (RFR) is a set of federal laws in the United States that requires some businesses and organizations to develop and implement written plans to protect consumers from identity theft. Any creditor or financial institution that allows a covered account must implement a plan for the red flag rules.
- Covered accounts are consumer accounts that allow deferred payments, allow multiple payments, or provide consumers and merchants with a reasonably foreseeable risk of identity theft.
- A creditor is a business or organization that provides goods or services for a specified period, and later refers to the billing customer.
- A financial institution is a business or organization that holds consumer trading accounts directly or indirectly.
- The RFR requires written plans to be appropriate to the size, nature, and complexity of the applicable business, taking into account market trends and historical experience in dealing with identity theft.
- The following 4 points:
- A pattern, practice, or specific activity to be identified by a business or organization when a red flag indicates potential identity theft.
- How the business or organization intends to detect the red flag that has been identified.
- How businesses or organizations respond to the detection of the red flags they have identified.
- How the business or organization intends to evaluate the success of its project and maintain it.
- Each plan must be formally authorized and approved by an entity's governing body or senior management. And each plan must state who is responsible for implementing and managing the plan. It must also address issues such as how a company or organization trains employees, complies with audits, and produces annual assessment reports.
- This regulation was formulated by the US Federal Trade Commission in conjunction with the Office of the Monetary Authority (OCC), the Federal Deposit Insurance Corporation (FDIC), the Federal Reserve Board, and several other federal agencies, and complies with the FACT Act of 2003 . The regulations provide that in the event of an RFR violation, the Federal Trade Commission may initiate a civil action seeking a fine of up to $ 2,500 for violations.
- Creditors and financial institutions that allow covered accounts must comply with the red flag rules starting June 1, 2010.