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Public Statements

Red Flag Program Clarification Act of 2010

Floor Speech

By:
Date:
Location: Washington, DC

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Mr. DODD. Gladly. The FTC's red flags rule implementing section 114 of the FACT Act became effective on January 1, 2008. The rule applied to ``creditors,'' defined under the FACT Act the same way as in the Equal Credit Opportunity Act, ECOA, to include any person that sells a product or service for which the consumer can pay later.

After the red flags rule became final, many businesses and other entities indicated that they were not aware that they would be covered by this rule. At first, the FTC delayed enforcement of the rule several times to allow these entities time to come into compliance with the rule. Then, a number of professional organizations, including the American Bar Association and the American Medical Association, sued the FTC for taking the position that professionals were ``creditors'' when they allowed consumers to pay later, and would have to comply with its red flags rule. On May 28, 2010, the FTC announced that it would delay enforcing its red flags rule through December 31, 2010, and asked Congress to pass legislation that would resolve any questions about which entities should be covered as ``creditors'' and to obviate the need for further enforcement delays.

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Mr. DODD. Yes, I agree that this bill narrows the applicability of the red flag identity theft provisions of the FACT Act to cover those creditors where identity thieves can do the most harm--creditors that use consumer reports, furnish information to consumer reporting agencies, and other creditors that loan money, such as payday lenders, that do not necessarily use consumer reports or furnish information to consumer reporting agencies.

The legislation also makes clear that lawyers, doctors, dentists, orthodontists, pharmacists, veterinarians, accountants, nurse practitioners, social workers, other types of health care providers an other service providers will no longer be classified as ``creditors'' for the purposes of the red flags rule just because they do not receive payment in full from their clients at the time they provide their services, when they don't offer or maintain accounts that pose a reasonably foreseeable risk of identity theft.

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