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Identity Theft Red Flags Take Effect
The more mobile and "Web-based" life gets, the less we know our customers' faces. At the same time, the surge in identity theft makes it more crucial than ever to make sure anyone applying for credit really is who they say they are.
LifeTips reports that there are 19 new victims of identity theft a minute, roughly 10 million per year. Still growing, identity theft and fraud accounted for more than a third of the total complaints to the Federal Trade Commission (FTC) in 2006.
Hardly a problem under control. In fact, so horrific are tales of stolen identity that even the least patient customers (New Yorkers) will tolerate, even appreciate, businesses taking extra time and steps to protect their identities.
In January, new FTC "Red Flag Identity" rules took effect formalizing the steps that can and must be taken. Newly added to the Fair Credit Reporting Act (FCRA), Red Flag rules aim to prevent and mitigate identity theft by requiring banks, credit unions, leasing and rental companies, auto dealers and other businesses to define and enforce processes for spotting "red flags" in a credit applicant's history. The government moved so fast with Red Flags that, with full institutional compliance mandated by November 1, many businesses remain unaware the rules exist and apply to them.
By now, companies should have at the very least defined processes for detecting and acting to prevent identity theft. Depending on the types of business, "Red flags" might include suspicious changes of address, suspicious use of Social Security numbers, inactive accounts becoming active, unusual activity on credit reports, and notices from victims of identity theft or law enforcement agencies.
What constitutes a "red flag" may vary, and the actions required and penalties for non-compliance are also open to some interpretation. But one thing is clear: many businesses impacted by Red Flags are behind the 8-ball in terms of both awareness and compliance.
In developing a Red Flags "Best Practice," businesses must assess risk throughout the process, in terms of minimizing customers' exposure as well as its own in terms of non-compliance. Partners and data providers should also be sourced thoroughly in terms of credibility and accountability for results.
If ever a crime took minutes to prevent and years to undo, it's identity theft. Fortunately, rules like Red Flags and an increased awareness can go a long way in a short time. Use the tool to the (right) to see how you're affected.
Do you have questions about Red Flags? We're happy to help. Contact us at redflags@microbilt.com.
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