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New laws help consumers, hurt businesses
There is a set of laws which went into effect on January 1st 2008 called the Red Flag Rules. The Red Flag Rules are part of the FACTA law. This law is about much more than getting a free credit report or only showing the last four numbers on credit card receipts. It's all about information security and trying to protect the public from the epidemic of identity theft. The Red Flag Rules along with the Disposal Rule outline what must be done to protect personal information. Consumer Benefits You are entitled to a free annual credit report. This means you can actually see what is on your credit report and find indications or identity theft through your report. Your Credit card number is truncated on all electronic receipts. Your expiration date is also removed which means people cannot just root through the trash to find credit card receipts to commit fraud. Unfortunately this will not stop all identity theft since credit fraud is only about 27% of the total identity theft cases reported. Identity theft can take many different forms having nothing to do with your finances. Your driver's license, your social security numbers, your medical history and your reputation can all be forms of identity theft. Business Drawbacks Since all of these types of information can be contributors to identity theft and all of this information is in the hands of others (government agencies, businesses, utility companies, banks etc), the Federal government has enacted the Red Flag rule to hold responsible those who have this type of information. If you have a business, odds are good that you fall under this law. Those affected by the law are financial institutions, creditors and anyone who uses a consumer report for a business purpose. Financial institution is not limited to just banks and credit cards companies but to every business that is significantly engaged in providing financial products and services. Check cashing services, payday loans and pawn shops all qualify as financial institutions. Creditor is anyone who accepts a deferred payment. Deferred payments are any type of payment that is not immediately transferable. Cash is immediately transferable because you can accept it and turn right around and use it to make a purchase. Checks and credit cards are deferred payments since the check must clear and the credit card must be processed. It is important to understand that there are no small business exemptions to this law. Every business or entity including non-profits fall under this law. This law sets forth fines of up to $1,000,000, Jail time of up to 10 years, removal of management and civil liability with no statutory limits. It is important that all business owners understand and comply with this law in order to protect your business.
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Contributor's Note
Business owners must be proactive about information security and identity theft.
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