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:

  • extend, renew, or continue credit;
  • arrange for someone else to extend, renew, or continue credit; or
  • are the assignee of a creditor who is involved in the decision to extend, renew, or continue credit.

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:

Contact ALTA at 202-296-3671 or

North American Title Insurance Company (NATIC) is a seasoned title insurance underwriter, helping title agents to achieve their individual business goals for more than 50 years. Today, the company conducts real estate settlement services in 39 states and the District of Columbia through a network of experienced, independent agents.