Red Flags Rule Revised Again

A new bill was signed into law at the end of 2010, providing clarification to the controversial Red Flags Rule. The Red Flag Program Clarification Act of 2010 was adopted on December 18, 2010, in order to clarify the application of the law and eliminate confusion over the types of businesses that are subject to it. The Red Flags Rule is regulated by the Federal Trade Commission, which has previously announced that enforcement of the law was to begin on December 31, 2010.

The Red Flags Rule generally applies to businesses that fall under the definition of a "creditor." The Red Flag Program Clarification Act of 2010 limits the definition of a "creditor" under the law to those entities that use consumer reports, furnish information to consumer reporting agencies, or advance funds to or on behalf of a person, based on an obligation of that person to repay the funds. In addition, the new law exempts creditors that advance funds on behalf of a person for expenses