Red Flags Rule

Hand waving a red flag

Red Flags Rule Compliance

A “red flag ” is a pattern, practice, or specific activity that indicates the possible existence of identity theft.  The RED FLAGS RULE is designed to fill the cracks in the system through which identity thieves could fraudulently pilfer the identities of others for personal gain.

 Six agencies were involved in drafting the red flag rules: the Treasury Department’s Office of Thrift Supervision, Office of Comptroller of the Currency, Federal Deposit Insurance Corp., Federal Trade Commission (FTC), National Credit Union Administration and the Federal Reserve System. They came up with the following guidelines as examples of red flags. These were gleaned from the Identity Theft Red Flags and Address Discrepancies under the Fair and Accurate Credit Transactions Act of 2003.

26 Red Flags**

  1. A fraud alert included with a consumer report.
  2. Notice of a credit freeze in response to a request for a consumer report.
  3. A consumer reporting agency providing a notice of address discrepancy.
  4. Unusual credit activity, such as an increased number of accounts or inquiries.
  5. Documents provided for identification appearing altered or forged.
  6. Photograph on ID inconsistent with appearance of customer.
  7. Information on ID inconsistent with information provided by person opening account.
  8. Information on ID, such as signature, inconsistent with information on file at financial institution.
  9. Application appearing forged or altered or destroyed and reassembled.
  10. Information on ID not matching any address in the consumer report, Social Security number has not been issued or appears on the Social Security Administration’s Death Master File, a file of information associated with Social Security numbers of those who are deceased.
  11. Lack of correlation between Social Security number range and date of birth.
  12. Personal identifying information associated with known fraud activity.
  13. Suspicious addresses supplied, such as a mail drop or prison, or phone numbers associated with pagers or answering service.
  14. Social Security number provided matching that submitted by another person opening an account or other customers.
  15. An address or phone number matching that supplied by a large number of applicants.
  16. The person opening the account unable to supply identifying information in response to notification that the application is incomplete.
  17. Personal information inconsistent with information already on file at financial institution or creditor.
  18. Person opening account or customer unable to correctly answer challenge questions.
  19. Shortly after change of address, creditor receiving request for additional users of account.
  20. Most of available credit used for cash advances, jewelry or electronics, plus customer fails to make first payment.
  21. Drastic change in payment patterns, use of available credit or spending patterns.
  22. An account that has been inactive for a lengthy time suddenly exhibiting unusual activity.
  23. Mail sent to customer repeatedly returned as undeliverable despite ongoing transactions on active account.
  24. Financial institution or creditor notified that customer is not receiving paper account statements.
  25. Financial institution or creditor notified of unauthorized charges or transactions on customer’s account.
  26. Financial institution or creditor notified that it has opened a fraudulent account for a person engaged in identity theft.

** Source: Federal Trade Commission

Unsure if the Red Flags Rule applies to your organization?

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Automated Help With FTC Red Flags Compliance

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Click here to review an automated solution to these 26 red flags.

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FDIC Red Flags Examination Procedures: Click here to download