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Congress Passes Bill That Narrows Scope of "Red Flags" Rule

On December 7, the House cleared a bill to narrow the scope of the Federal Trade Commission's "red flags" rule, which requires "creditors" to have...
December 14, 2010

On December 7, the House cleared a bill to narrow the scope of the Federal Trade Commission's "red flags" rule, which requires "creditors" to have identity theft prevention programs in place by year's end. The bill was introduced by Sens. John Thune (R-S.D.) and Mark Begich (D-Alaska). The Senate approved it by unanimous consent November 30.

The legislation, dubbed the Red Flag Program Clarification Act of 2010 (S. 3987), passed by voice vote and now awaiting the president's signature, would limit the definition of creditor under the Fair Credit Reporting Act to entities that use consumer reports, furnish information to consumer reporting agencies, or advance funds to or on behalf of a person. In addition, the measure would exclude any entity that "advances funds on behalf of a person for expenses incidental to a service provided by the creditor to that person." The legislation has the potential to resolve a threatened court fight between the American Bar Association and the FTC over the scope of the red flags rule.

What It Means to Agents: Insurance is not included - but there are some important gray areas in which it is possible that PIA member agencies could be expected to comply with the general business practice requirements by this rule. Members may continue to have an exposure when as an agency they decide to extend credit to their customers, i.e., by financing insurance premiums either directly as a program developed by the agency, or when doing so through a financing company that is not a licensed insurance premium finance carrier.

Click here to read PIA National Guide to Red Flags Rules (8/10/09)

Click here to access a Federal Trade Commission guide to compliance.