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Red Flags 101
What is a Red Flag?
A Red Flag is a pattern, practice or specific activity that indicates the possible existence of identity theft.
The Laws
The identity theft program requirement is triggered by two sections in the FACT Act. Section 315 deals with the address match requirement. Section 114 deals with the “Red Flag” alert requirement.
Effective Date: January 1, 2008
Compliance Deadline: November 1, 2008
Section 315: Address Match Requirement
This section applies to users of credit reports who get a notice of address discrepancy from a consumer reporting agency. A notice of address discrepancy is a notice that the address included in the user’s request for a consumer report and the address or addresses in the consumer reporting agency’s files are substantially different. Inconsistencies could result from a harmless typo by the dealer, or attempted fraud by the applicant. This section requires dealers to implement policies, training and procedures for handling a notice of address discrepancy.
Section 114: "Red Flag" Alert Requirement
"Red Flag" fraud alerts provide a vital service by issuing a warning about information that appears to be genuine on the customer’s application, but may be questionable. These warning messages focus on high-risk applicants. The final rule also states: "While an institution or creditor may determine that particular guidelines are not appropriate to incorporate into its program, the program must nonetheless contain reasonable policies and procedures to meet the specific requirements of the final rules."
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