legal-lawWashington, DC – The House of Representative’s passed the Red Flag Program Clarification Act of 2010 to clarify a burdensome regulation by the Federal Trade Commission (FTC) which would have required small businesses to undertake costly measures to prevent identity theft. It passed the Senate by Unanimous Consent on November 30, 2010 and is now on President Obama’s desk to be signed into law.

This legislation clears up the uncertainty it created when it directed the Federal Trade Commission and other federal agencies to enact and develop the Identity Theft Red Flags Rule, which requires many businesses and organizations to have a written Identity Theft Prevention Program policy. The policy would have been designed to identify the warning signs of identity theft.

The bill states that small businesses, such as physician offices and attorneys, should not be classified as creditors.

The legislation stipulates, in part, that the term “creditor” refers only to businesses “that regularly and in the ordinary course of business (i) obtain or use consumer reports; (ii) furnish information to consumer reporting agencies; or (iii) advance funds to or on behalf of a person, based on an obligation of the person to repay the funds or repayable from specific property pledged by or on behalf of the person… for expenses incidental to a service provided by the creditor to that person.”

The Rule doesn’t require any specific practice or procedures, but gives businesses the discretion to tailor their ID theft detection program policy to the nature of the business and the potential risks it faces.

Businesses with a high risk for identity theft may need more comprehensive procedures – like using Consent Based SSN Verification (CBSV) from the Social Security Administration to confirm the identity of new employees and customers.

Clients can mitigate ID theft and fraud with verification obtained from the official governmental issuing authority using the personal identifiers of Name, SSN, Date of Birth, Gender, and the Death Indicator. Use Consent Based SSN Verification (CBSV) from the Social Security Administration to strengthen Red Flags Rule policies and mitigate risk for your clients.

Employers Choice Screening Legislative Alerts are provided as a free service to clients, friends and subscribers of Employers Choice Screening, a division of Diversified Risk Management, Inc. The intent is to provide information of value to attorneys, human resource, security, and risk management professionals. The information contained in this e-mail alert is intended to provide useful information on the topics covered, but should not be construed as legal advice or a legal opinion. Your comments are appreciated.

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