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Oct 23, 2008
Categories: Consumer Lending Home-Secured Lending Business Lending

FTC Delays Red Flags Enforcement for 6-months; Letter to NCUA

Yesterday, the Federal Trade Commission (FTC) announced it is granting a six (6) month delay of enforcement on Red Flags compliance for its regulated entities.  The FTC's jurisdiction for Red Flags enforcement is quite large.  It covers finance companies, automobile dealers, mortgage brokers, utilities companies, telecommunications companies, and other entities who regularly extend credit to consumers.  The FTC included this language in its explanation for the extension:

"The Commission staff launched outreach efforts last year to explain the Rule to the many different types of entities that are covered by the Rule. The agency published a general alert on what the Rule requires, and, in particular, an explanation of what types of entities are covered by the Rule – http://www.ftc.gov/bcp/edu/pubs/business/alerts/alt050.shtm. During the course of these efforts, Commission staff learned that some industries and entities within the FTC’s jurisdiction were uncertain about their coverage under the Rule. These entities indicated that they were not aware that they were engaged in activities that would cause them to fall under the FACT Act’s definition of creditor or financial institution. Many entities also noted that, because they generally are not required to comply with FTC rules in other contexts, they had not followed or even been aware of the rulemaking, and therefore learned of the Rule’s requirements too late to be able to come into compliance by November 1, 2008. The Commission’s delay of enforcement will enable these entities sufficient time to establish and implement appropriate identity theft prevention programs, in compliance with the Rule."


The FTC's jurisdiction also covers state-chartered credit unions for Red Flags enforcement.  Thus, state-chartered credit unions' deadline for compliance with the Red Flags has been extended to May 1, 2009.  

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For federally-chartered credit unions, the FTC's extension does not provide relief.  NCUA has Red Flags enforcement authority for federal credit unions.  The compliance deadline is still November 1, 2008.  NAFCU has drafted a letter to NCUA seeking parity with state-chartered credit unions on this issue. 

Also, the FTC's delay does not provide relief to banks and thrifts regulated by the Office of Comptroller of the Currency (OCC) or the Office of Thrift Supervision (OTS).  Unless the OCC and/or OTS extends their compliance deadlines banks would be subject to the November 1, 2008 deadline.  

Editor's note: NCUA reportedly has no plans to extend the deadline for FCUs. (As of 10/24/08).

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