Amended Red Flags Rule now in effect — are you still a creditor?

The FTC’s amended definition of ‘creditor’ within the Red Flags Rule is now in effect. The definition is narrower in scope, but under it a franchisor may still qualify as a ‘creditor’. For instance, if you use a third-party servicer to obtain credit information on your behalf, or if you finance franchisee purchases of required equipment, you may be a ‘creditor’.

Initially promulgated in November 2007, the Identity Theft Red Flags Rule was created to fight the rising tide of identity theft in the US. The Red Flags Rule requires ‘creditors’ and ‘financial institutions’ who administer ‘covered accounts’ to develop and implement a written programme to identify, detect and respond to ‘red flags’ or patterns or activities that suggest attempted identity theft in connection with customer accounts that they administer. The Red Flags Rule became effective on 1 January 2008, with actual enforcement ultimately beginning on 31 December 2010…

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