FTC Updates Red Flags Rules to Clarify Definition of Creditor
by: Margaret Wright, Esq.
The Federal Trade Commission (FTC) has issued an Interim Final Rule to amend 16 CFR Part 681 of their Red Flags Rules to revise the definition of creditor as defined in the Red Flag Program Clarification Act of 2010.
Prior to the Red Flag Program Clarification Act, the Fair Credit Reporting Act (FCRA) defined creditor as referenced in the Equal Credit Opportunity Act (ECOA) section 702: “Any person who regularly extends, renews, or continues credit; any person who regularly arranges for the extension, renewal, or continuation of credit; or any assignee of an original creditor who participates in the decision to extend, renew, or continue credit.” The ECOA definition was also referenced in the FTC’s Red Flags Rules promulgated as required by FCRA.
The Red Flag Program Clarification Act of 2010 amended the definition creditor for the purposes of the Red Flag Rules as a creditor, as defined in ECOA, that regularly and in the ordinary course of business:
- Obtains or uses consumer reports, directly or indirectly, in connection with a credit transaction;
- Furnishes information to consumer reporting agencies…in connection with a credit transaction; or
- Advances funds to or on behalf of a person, based on an obligation of the person to repay the funds or repayable from specific property pledged by or on behalf of the person. However advancement of funds does not include a creditor “that advances funds on behalf of a person for expenses incidental to a service provided by the creditor to that person.”
- Additionally, a creditor may also be determined based on the offering or maintenance of “accounts that are subject to a reasonably foreseeable risk of identity theft.”
http://www.allregs.com/ao/main.aspx?did2=6e119a219d004e0ba887fe0ab4d5b712
Previous Red Flag Program Clarification Act of 2010 Articles:
AllRegs Compliance Commentary:
http://www.allregsmortgage.com/pages/Red-Flag-Program-Clarification-Act-of-2010.html
Bankers Advisory, Inc. Compliance Monitor:
http://cdn.s3.webcontentor.com/OFFICE/BANKER01/files/misc_files/110126073243_12.29.10.Red.Flags.Clarification.Act.pdf
About the Author:
Margaret is Vice President & Senior Counsel at Bankers Advisory and serves as the firm’s Director of Regulatory Compliance Research. She is a graduate of Stonehill College and received her Juris Doctor from Suffolk University Law School. She is admitted to the Massachusetts Bar and serves on the Compliance Committee for the Massachusetts Mortgage Bankers Association. She can be reached at margaret@bankersadvisory.com
Margaret Wright, JD, is regulatory compliance director with CLA. She is a graduate of Stonehill College and earned her juris doctor at Suffolk University Law School. She is admitted to the Massachusetts Bar.
Comments are closed.