Deadline Newsroom: Final 'Red Flag' Rules Set To Wave Off ID Theft

Preemptive federal "red flag" regulations, designed to strike at the heart of identity theft in its earliest stages, rolls out this year. (More ID theft news.)

by Broderick Perkins
© 2008 DeadlineNews.Com

Deadline Newsroom – Preemptive federal "red flag" regulations, designed to strike at identity theft in its earliest stages, rolls out this year.

Beginning Jan. 1, 2008, with all federally regulated financial institutions ordered to be in full compliance by Nov. 1, 2008, the so-called "Red Flag" provisions of the Fair and Accurate Credit Transactions Act of 2003 (FACTA), requires that financial institutions and creditors develop and deploy an Identity Theft Prevention Program for combating ID theft on new and existing accounts.

The Red Flag regulations are included in the same massive regulatory overhaul of the Fair Credit Reporting Act (FCRA) that gave consumers free credit reports and a host of additional protections.

Under Red Flag provisions, each institution must develop a program that will

• Identify relevant patterns, practices, and specific forms of activity that are "red flags" signaling possible ID theft.
• Include a mechanism to detect red flags identified by the program.
• Quickly respond to detected red flags in a way to both prevent and mitigate ID theft.
• Be updated regularly to reflect changes in real world risks from ID theft.

If you are the victim of ID theft, you don't actually lose your identity and wander aimlessly like an amnesiac Jane or John Doe.

ID theft occurs when someone steals your personal identifying information and uses it in a crime. With your Social Security number, driver's license number, credit account numbers, passwords or other information in hand, thieves can masquerade as you to access your financial accounts, withdraw cash, make credit purchases, and open additional accounts in your name.

The newest identity theft data reveals greater awareness, new consumer protections and industry actions have already begun to stem the tide of ID theft.

The number of victims of ID thefts decreased from 10.1 million in 2003 to 8.4 million in 2007. From 2006 to 2007, the total amount lost to ID fraud decreased from $55.7 billion to $49.3 billion; per victim losses decreased from $6,278 to $5,720 and resolution hours per victim fell from 40 hours to 25 hours, according to Javelin Strategy & Research's 2007 Identity Fraud Survey Report.

Federal regulatory efforts should take a bigger bite out of the crime.

The final rules especially target the incidence of requests for changes of address followed closely by a request for an additional or replacement card as a common ID theft method of operation to watch. The rules also include an additional two dozen guidelines to help institutions root out other suspicious activity that warrants attention.

The guidelines say actions institutions should be on the lookout for include:

• ID numbers. Use of a single Social Security number or other identifying number used to open accounts under different names.
• Alerts and freezes. ID theft alerts from fraud detection services, customers, law enforcement agencies and others. A credit bureau's notice of credit freeze provided to an institution along with the institution's requested consumer credit report.
• Extra activity. An increase in credit report inquiries or other unusual patterns on a credit report.
• Questionable information. The appearance of doctored or forged documents; inconsistent information or identifying information associated with known fraudulent activity.
• Inconsistencies. A new revolving credit account used in a manner commonly associated with fraud patterns; an account used in a manner not consistent with established patterns of activity on the account; applicants failing to provide all required identifying information and information supplied that is not consistent with existing information on file.
• Mail sent to the customer's on file address repeatedly returned as undeliverable among others.

• Consumers looking for help with ID theft prevention efforts should visit OnGuardOnLine.com, and take the animated "ID Theft Face Off" game-quiz to test ID theft knowledge and play the file sharing "P2P Threeplay" game to get some insight on the associated risk.

The Web site features a host of entertaining, game-like approaches to learning about Internet fraud, computer security, and personal information protection.

• Also visit the Federal Trade Commission's ID Theft Page for details on ID theft protection steps.

• Deadline Newsroom's ID Theft Archives

• DeadlineNews.Com's Consumer Credit Center

© 2008 DeadlineNews.Com

Broderick Perkins, an award-winning consumer journalist of 30 years, is publisher and executive editor of San Jose, CA-based DeadlineNews.Com, a real estate news and consulting service, and the new Deadline Newsroom, DeadlineNews.Com's new backshop. In both cases, it's where all the news really hits home.