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The Red Flag provisions of the Fair and Accurate Credit Transactions Act take effect on Nov. 1, 2008. Although the final regulations were issued Oct. 31, 2007, and regulators have issued initial guidance, there is still some confusion as to how credit unions can rapidly deploy an effective Red Flag rules program. The good news is that many credit unions already have the processes and technology systems in place that can be leveraged in developing their Red Flag rules program. However, a dedicated effort needs to be employed to ensure appropriate compliance with the new requirements.

Red Flag provisions are intended to help consumers fight the growing crime of identity theft. If a Red Flag is detected, it doesn’t necessarily mean that identity theft has occurred; it means that the credit union should investigate the warning and document an appropriate response.

The Red Flag rules are in three regulations, including requirements for an identity-theft prevention program, address discrepancy requirements and requirements for card issuers. Each credit union that holds any member account or other account for which there is a reasonably foreseeable risk of identity theft is required to develop and implement an identity-theft prevention program. The program must include reasonable policies and procedures for detecting, preventing and mitigating identity theft.

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