NLBMDA ALERT: FTC Grants Three-Month Delay in Enforcement of Red Flags Rule

From NLBMDA

The Federal Trade Commission has announced another delay in its enforcement of the "Red Flags" Rule, which requires creditors to have Identity Theft Prevention Programs. The FTC is now delaying enforcement of the new rule until August 1, 2009, to give creditors additional time in which to develop and implement written identity theft prevention programs. The original deadline was November 1, 2008.

On November 9, 2007, the FTC published the final Identity Theft Red Flags regulations and guidelines. The rule, promulgated pursuant to the Fair and Accurate Credit Transactions Act of 2003 (FACTA), requires creditors to develop and implement written "identity theft prevention programs." The programs must provide for the identification, detection, and response to patterns, practices, or specific activities - known as "red flags" - that could indicate identity theft.

The FTC apparently agrees with NLBMDA and several other trade groups that voiced concerns with the FTC regarding ambiguities in the new rule and the lack of specific guidance from the FTC for businesses that may extend types of credit to its business customers.

"Given the ongoing debate about whether Congress wrote this provision too broadly, delaying enforcement of the Red Flags Rule will allow industries and associations to share guidance with their members, provide low-risk entities an opportunity to use the template in developing their programs, and give Congress time to consider the issue further," FTC Chairman Jon Leibowitz said.

NLBMDA has prepared a sample Red Flags Compliance Program for LBM dealers, which can be downloaded here. Additional information on the rule can be found on the NLBMDA website, www.dealer.org, in the "Government Affairs" section. See the full text of the FTC release announcing the delay in enforcement at: http://www2.ftc.gov/opa/2009/04/redflagsrule.shtm. They have also now established a compliance site for businesses at http://www.ftc.gov/redflagsrule.