Federal Law Requires Businesses To Implement Formal Identity Theft Prevention Programs

A recent wave of class action lawsuits was aimed at the widespread failure of U.S. retailers to comply with the credit card redaction provisions of the Fair and Accurate Credit Transactions Act (FACTA). FACTA has returned, poised to cause a new generation of challenges for businesses with regulations that are commonly known as the "Red Flags Rule." FACTA applies the Red Flags Rule to any business that allows a consumer to pay for property or services after the property is conveyed or the services are rendered.

The Red Flags Rule Requires Identity Theft Programs

The purpose of the Red Flags Rule is to require businesses to establish procedures to detect identity theft and minimize the damage that identity theft causes. The Red Flags Rule, issued jointly by the Federal Trade Commission (FTC), U.S. Department of the Treasury, Federal Reserve System, Federal Deposit Insurance System and National Credit Union Administration, requires organizations that maintain "covered