Thursday, November 8, 2007
Red flags can be good...
Recent studies indicate that identity theft is actually declining a bit; but, it is still a major problem. Several laws have been passed that try to deal with this issue, both to prevent it from happening in the first place or to deal with making it easier for the victims to recover their good credit.
Beginning Jan. 1, 2008, with all federally regulated financial institutions ordered to be in full compliance by Nov. 1, 2008, the so-called "Red Flag" provisions of the Fair and Accurate Credit Transactions Act of 2003 (FACTA), requires that financial institutions and creditors develop and deploy an Identity Theft Prevention Program for combating ID theft on new and existing accounts.
The Red Flag regulations are included in the same massive regulatory overhaul of the Fair Credit Reporting Act (FCRA) that gave consumers free credit reports and a host of additional protections.
Under Red Flag provisions, each institution must develop a program that will:
•Identify relevant patterns, practices, and specific forms of activity that are "red flags" signaling possible ID theft.
•Include a mechanism to detect red flags identified by the program.
•Quickly respond to detected red flags in a way to both prevent and mitigate ID theft.
•Be updated regularly to reflect changes in real world risks from ID theft.
I’ve actually experienced a form of “red flag” diligence within the last couple of years. Every time that I travel anywhere I start getting red flag interventions at gas stations restaurants, hotels and other places. My credit card companies know my normal patterns – staying around home for the most part; so, when they start seeing gas being purchased 1-2 states away from home, they get suspicious. Normally that takes the form of having to enter more information at the pump or at the check-out– information that only the real card holder might know. At first I was annoyed at this practice; but, then as I thought more about it, I was happy that they are looking at each transaction and trying to make sure that it’s me, and not some thief with my credit card in his/her hands.
I’ve actually had 2-3 intercepts of seemingly unknown credit card charges. A couple turned out to be valid, but were suspicious just because of the names of the company placing the charges. That can happen too – you charge something from a company with a name that you recognize and the credit card bill shows a completely different name. Many companies are really subsidiaries of large companies or use third party billing companies to collect credit card charges. The name changes can get confusing to the consumer, since most credit card bills don’t contain enough information for one to tell what it is that is being charged for on the bill. Perhaps that should also be included in the legislation that is being passed to deal with this issue. The credit card companies seem to do a good job of following up and investigating any suspicious charges that you challenge, but putting more information on the bill about what the charge is for would cut down on the number of false alarms that need to be investigated.
So, I say wave the red flags all you want, just keep the bad guys at bay.