ALTA Seeks Guidance from FTC Regarding Red Flags Rule
|October 18, 2009|
The American Land Title Association (ALTA) and the American Escrow Association (AEA) jointly sent a letter to the Federal Trade Commission (FTC) seeking guidance on the Red Flags Rule, which goes into effect Nov. 1.
ALTA is seeking information from the FTC on whether or not the title insurance industry falls under jurisdiction of the Red Flags Rule. ALTA believes confusion and uncertainty regarding the rule's application needs clarified.
You can click here to read ALTA's letter to the FTC.
The Red Flags Rule requires "creditors" and "financial institutions" with covered accounts to implement programs to identify, detect, and respond to the warning signs, or "red flags," that could indicate identity theft. The financial regulatory agencies, including the FTC, developed the Rule, which was mandated by the Fair and Accurate Credit Transactions Act of 2003 (FACTA).
A "financial institution" is a bank, savings and loan, credit union, or other entity that holds a "transaction account" belonging to a consumer. A "transaction account" is an account that allows the owner to make payments or transfers. Examples include checking accounts, savings accounts that permit automatic transfers, and share draft accounts. Another example would be a brokerage account that allows consumers to write checks. The FTC does not specifically mention the title insurance industry or escrow accounts in regard to the Rule. The American Land Title Association is working with the FTC to see if the industry falls under this regulation.
Your business or organization is a "creditor" if you regularly:
Under the Rule, "credit" means an arrangement by which you defer payment of debts or accept deferred payments for the purchase of property or services. In other words, payment is made after the product was sold or the service was rendered. Some examples of creditors are finance companies, automobile dealers, mortgage brokers, utilities, and telecommunications companies. Even if you're a non-profit or government agency, you still may be a creditor if you accept deferred payments for goods or services. However, simply accepting credit cards as a form of payment does not make you a creditor under the Rule.
Important links for more information: