"Red Flags" in the Sunset; also known as FACTA.

Posted by  on Mar 29, 2010

The recent growth of identity theft initiated revisions to FACTA (Fair and Accurate Credit Transactions Act, 2003) and "Red Flags" requirements to be implemented by August 1, 2009. Financial institutions, which include (but are not limited to) banks, mortgage brokers, credit unions, and similar lending institutions, must now help consumers detect possible identity fraud.

The Act requirements are still are being finalized, with no projected completion date. Existing are requirements for financial institutions:

  • Create and document procedures identifying and detecting potential fraud (Red Flags).
  • Compare loan applications to reports from credit reporting agencies (Experian, Equifax and TransUnion).
  • Provide identity theft victims with a notice of the right to file a fraud alert, block information resulting from fraud, and obtain copies of documents to commit fraud.
  • Confirm risk-based pricing in writing, electronically or verbally, when offering higher but best loan interest rates due to borrower's credit history.
  • Provide borrowers with credit reports when loan applications are taken.

One Act benefit to borrowers is the now-legal right to obtain one free credit report each year, separately from loan applications. Today's the borrowers remain responsible for credit report accuracy. Beware of the many sites offering free credit reports--if it's not www.freeannualcreditreport.com, there are probably strings attached. You may have to purchase credit monitoring, or your data could be sold for marketing, or it could even be an identity theft scam.

One Act downside is that the FTC has specifically prevented states from implementing more aggressive laws.

If you are applying for a loan, be aware of some data which may be viewed as identity theft indicators:

  • Address differences
  • Appearance of altered IDs
  • Physical difference between ID information and applicant's
  • Altered loan application
  • Prior borrower or law enforcement notification of fraudulent activity to credit reporting agencies
  • Majority of credit used for cash advances
  • Change in spending habits and number of recent lender inquiries
  • Suspicious Social Security number


A Website to assist you in deterring, detecting, and defending against identity theft is available.

A summary of the very detailed analysis FACTA changes can be found on the Consumer Law Website.


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