The FTC's Red Flags Rule Update: Revised Definition Of Creditor

Under the Red Flags Rule (the "Rule"), part of the Fair and Accurate Credit Transactions Act that came into effect on January 1, 2008, certain businesses such as financial institutions and creditors are required to develop a set of rules to detect, prevent, and mitigate identity theft. On December 18, 2010, a change in law amended the definition of "creditor" under the Rule and limited the circumstances under which creditors are covered as well as expanded the definition of "financial institution."

Amendment Provisions

A "creditor" is now defined as one whom regularly, and in the ordinary course of business, meets one of three general criteria:

1. Obtains or uses consumer reports in connection with a credit transaction;