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EFFECTIVE DATE: The final rule is effective
FOR FURTHER INFORMATION CONTACT:
FOOTNOTE 1 The other banking agencies included the
FOOTNOTE 2 72 FR 63718 (
The Red Flags rule, implemented in the Board's Regulation V, Subpart J, defines the terms "credit" and "creditor" by cross-reference to FCRA section 603(r)(5). 15 U.S.C. 1681a(r)(5). Section 603(r)(5) defines the terms "credit" and "creditor" by cross-reference to section 702 of the Equal Credit Opportunity Act (ECOA). ECOA section 702 defines "creditor" as "any person who regularly extends, renews, or continues credit; any person who regularly arranges for the extension, renewal, or continuation of credit; or any assignee of an original creditor who participates in the decision to extend, renew, or continue credit." 15 U.S.C. 1691a(e). The ECOA defines "credit" as "the right granted by a creditor to a debtor to defer payment of debt or to incur debts and defer its payment or to purchase property or services and defer payment therefor." 15 U.S.C. 1691a(d). Thus, the FCRA's red flags provisions have been broadly applied to banks, finance companies, automobile dealers, mortgage brokers, utility companies, and telecommunications companies. 12 CFR 222.90(b)(5).
The scope of the Board's Red Flags rule is set forth in 12 CFR 222.90(a), which states that the Board's rule applies to financial institutions and creditors that are state member banks (other than national banks) and their respective operating subsidiaries, branches and agencies of foreign banks (other than federal branches, federal agencies, and insured state branches of foreign banks), commercial lending companies owned or controlled by foreign banks, and organizations operating under section 25 or 25A of the Federal Reserve Act. Financial institutions and creditors that are not covered by the Board's rule are covered by substantially identical rules issued by other federal agencies.
II. The Red Flag Program Clarification Act of 2010
FOOTNOTE 3 Public Law 111-319, 124 Stat. 3457 (
The Clarification Act's revised definition excludes, however, those creditors that advance funds on behalf of a person for expenses incidental to a service provided by the creditor to that person. 15 U.S.C. 1681m(e)(4)(B). The legislative intent of narrowing the definition of "creditor" in the Red Flags rule was to exclude from coverage those persons that sell a product or service for which the consumer can pay later, such as lawyers and doctors. /4/
FOOTNOTE 4 156 Cong. Rec. S8289 (daily ed.
The Clarification Act also grants authority to the Board and the other agencies to determine, through a rulemaking, whether there are other creditors that offer or maintain accounts that are subject to a reasonably foreseeable risk of identity theft that should be subject to the Red Flags rule. 15 U.S.C. 1681m(e)(4)(C). The Board is not using its discretionary rulemaking authority at this time to extend the application of its Red Flags rule to additional creditors.
III. The Board's Proposed Revisions to Regulation V
FOOTNOTE 5 79 FR 9645 (
IV. The Final Rule
As discussed above, the Board proposed to amend the definition of "creditor" in
Under the Clarification Act and the final rule, creditors that do not regularly and in the ordinary course of business: (a) Obtain or use consumer reports in connection with a credit transaction; (b) furnish information to consumer reporting agencies in connection with a credit transaction; or (c) advance funds to or on behalf of a person, are no longer subject to the identity theft red flags requirements. However, the Red Flags rule still covers all financial institutions, regardless of whether they meet the revised definition of creditor. /6/ As a result, the revised definition does not affect the scope of the Board's rules, which only apply to state member banks and other financial institutions.
FOOTNOTE 6 The Board consulted and coordinated with the other banking agencies, the FTC, the NCUA, the CFTC, and the
Commenters also supported the proposal to revise Supplement A to Appendix J of Regulation V, which included a cross-reference to the Board's definition of a "notice of address discrepancy" in Regulation V (12 CFR 222.82(b)). Because the Board's rulemaking authority for the notice of address discrepancy provisions of the FCRA (15 U.S.C. 1681c(h)) transferred to the
--This is a summary of a
CFR Part: "12 CFR Part 222"
RIN Number: "RIN 7100 AE14"
Citation: "79 FR 30709"
Document Number: "Docket No. R-1484"
Federal Register Page Number: "30709"
"Rules and Regulations"
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