The "Red Flags" Clarification Act of 2010 was signed into law this past weekend.
the law has been couched as a relief for the nation's small businesses
from the burden of the Federal Trade Commission's (FTC's) regulations,
many doubts linger surrounding the constituency of trade creditors, who,
despite the new law, may still be required to have a "Red Flags"
program in place as the statute originally dictated.
described by the FTC, the new law "gives businesses the flexibility to
tailor their written ID theft detection program to the nature of the
business and the risks it faces. Businesses with a high risk for
identity theft may need more robust procedures-like using other
information sources to confirm the identity of new customers or
incorporating fraud detection software. Groups with a low risk for
identity theft may have a more streamlined program-for example, simply
having a plan for how they'll respond if they find out there has been an
incident of identity theft involving their business."
explanation sounds like a relief for businesses in general, it says
nothing about exemptions from the regulations, only a new flexibility in
their application. When asked how the law affects the
majority of NACM's membership, Wanda Borges, Esq., of Borges &
Associates, LLC, noted that "I don't think this changes a thing for our
trade creditors," describing the bill as "short and almost nonsensical."
the new law adds a few more criteria to the definition of a creditor,
it fails to explicitly and openly exempt trade or business creditors. The final portion of the bill also leaves the door open to further regulation that could apply to any business in any industry. "They
may have succeeded in eliminating the need for small law firms and
small doctor's offices to have 'Red Flags' programs in place, but that
catch-all at the end means our trade creditors aren't exempt," she
added. "I think what it does is gives businesses a better opportunity to
determine whether or not they're low risk or high risk. It's clear that
they have not excluded trade credit."
Stay tuned to NACM's Credit Real-Time Blog for more updates on the new law's application.
Jacob Barron, NACM staff writer