As identity theft affects more Americans each year, businesses are taking notice and taking action. The Fair and Accurate Credit Transactions Act of 2003 required most businesses to develop a set of standards, or "red flags," to identify possible cases of fraud or identity theft. As of 2008, most financial institutions have complied with the rules. However, many industries were unaware that the guidelines applied to them and have been given until June 1 to comply. On that date, health care providers, mortgage and real estate brokers, and the auto industry will come under the umbrella of the 2003 Act.
Banks and other large financial institutions have had red flag compliance rules and annual trainings in place for years. However, many small businesses have relied more on practical methods of dealing with fraud than standardized rules. In terms of protecting client information, "hardly any of them had a written procedure or policy specifically dealing with identity theft," California Employers Association human resources regional director Craig Strong told the Wisconsin Law Journal.
Businesses will be allowed to develop their own guidelines and detection measures regarding red flag compliance. For example, some businesses may define a red flag as a credit application with a different address listed than the one already on file, the Baltimore Sun reports. Companies will also have final say in how they proceed if a red flag is detected, whether they contact the police, refuse to extend credit or simply monitor the account more closely, the FTC told the newspaper.
Consumers can expect to provide more identification when they purchase goods and services. The rules require any business that provides customers with installment payment options for up-front services to comply with the program. Businesses that are able to extend loans, credit lines and financing options must also institute new fraud guidelines.
"People will notice more requests for verification for their identity, and some people will feel insulted or annoyed," Identity Theft Assistance Center president Anne Wallace told the Baltimore Sun. "I would urge them to regard this as a protection," Wallace said.
Identity theft constitutes a financial loss of millions each year to both consumers and businesses alike. Depending on the red flag guidelines imposed by businesses, it may be more difficult for criminals to apply for lines of credit using a different address, a fake driver's license or fraudulent paperwork.