FTC Grants Six-Month Delay of Enforcement for 'Red Flags' Rule

Utah Higher Education Assistance Authority (UHEAA) has learned that the Federal Trade Commission (FTC) will postpone enforcement of the new “Red Flags Rule” from November 1, 2008 until May 1, 2009.  The extension provides creditors and financial institutions time in which to develop and implement written identity theft prevention programs.

Under the Red Flags Rule, financial institutions and creditors with “covered accounts” must have in place programs to identify, detect, and respond to patterns, practices, or specific activities—known as “red flags”—that could indicate identity theft.  A “financial institution” is defined as a state or national bank, a state or federal savings and loan association, a mutual savings bank, a state or federal credit union, or any other entity that holds a “transaction account” belonging to a consumer.

Institutions of higher education also will generally be considered “creditors” under the Rule if they loan money and collect it.  Many schools hold “covered accounts”—a consumer account that involves multiple payments or transactions that are billed or payable monthly.  Postsecondary institutions likely subject to the “Red Flags Rules” are those that participate in the Federal Perkins Loan program, offer institutional loans to students (or faculty and staff), or offer an extended tuition payment plan throughout a semester or term.

For more information on the Red Flags Rule see the FTC press release available on the Web at http://ftc.gov/opa/2008/10/redflags.shtm.  The Department of Education also released a related Electronic Announcement that can be accessed through IFAP:  http://ifap.ed.gov/eannouncements/1014FTCRedFlagRules.html.

Any questions related to this Bulletin should be directed to UHEAA Policy and Training at 801.321.7166, or by e-mail to mjohnson@utahsbr.edu.

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