Many of you are aware of a law that was enacted several years ago, commonly referred to as the “Red Flags” Rule. Under the “Red Flags” Rule, any “creditor” with any “covered accounts” must have a “Red Flags” program. Because this rule is intended to help stop identity theft, it is intentionally broad. Originally, the definition of “creditor” was interpreted to include any person or business that regularly extends, renews, or continues credit or arranges for credit or accounts. A “covered account” is an account for goods or services used primarily for personal, family or household use; or any account for which there is a reasonably foreseeable risk to customers of identity theft. Initially, any company that sends out bills, invoices or statements was thought to be considered a “creditor” under this rule.
However, on December 7, 2010, Congress modified the scope of who is actually affected by the “Red Flags” Rule. Under the revised definition, professionals who extend credit only as part of their services, and with little risk of identity theft, are not subject to the “Red Flags” program. Therefore, attorneys, accountants, physicians, dentists and similar professionals are no longer subject to the “Red Flags” Rule.
If you have any questions about the “Red Flags” Rule, including whether you or your business would be considered a “creditor” or what a “Red Flags” Program should include, be sure to contact an attorney knowledgeable in this area of the law.
