Red Flags Rule—postponed again?

October 21, 5:48 PMIdentity Theft ExaminerJoe Campana

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The Red Flags Rule, a new law that was to go into effect for millions of businesses and organizations regulated by the Federal Trade Commission (FTC), was scheduled for enforcement beginning November 1, 2008. Instead, the FTC granted multiple reprieves delaying enforcement until May 1, 2009, then August 1, 2009 and again until November 1, 2009. Banks and other traditional financial institutions that are regulated by federal banking and credit union authorities have had to comply since the original date.

The delays in enforcement appear to have been forced by the American Medical Association (AMA) and possibly one other trade organization. They believe their small business practitioners would be inconvenienced by the new law.

The law, if implemented, could curb identity theft significantly because compliance with the law will stop many fraudsters, thieves and illegal immigrants from misusing the identities of millions of victims each year.  

The law  simply requires organizations that bill customers to authenticate the identity of the person to whom credit is being extended. Seems like a common sense requirement that any ethical business person would want to do. It helps prevent fraud by knowing who one is extending credit to. Identity thieves will be exposed “on the spot” in many cases when they attempt to obtain goods or services by using someone else’s identification.

The law has significant implications in the health care industry for both consumers and millions of illegal immigrants who have been obtaining health care by using other people’s names and social security numbers. Medical identity theft will essentially halt when impostors attempt to obtain medical benefits under someone else’s name. However, how will illegal immigrants get health care services, if they cannot use fake identification? This issue needs to be addressed in health care reform. This is also more likely the issue, than doctors finding authentication of their patients as being a burdensome requirement.

So will the AMA and others organizations prevail in preventing the Red Flags Rule from being enforced on November 1st or will exemptions be granted to exclude them. If we can learn from history, we will have to wait until the afternoon of Friday, October 30 before the FTC issues a statement on the fate of the Red Flags Rule.

I am betting that this time, enforcement will go into effect on November 1, 2009 and it will include small medical practices and other small businesses that have protested through their professional and trade groups.The law is common sense, it is easy to comply with and it helps the businesses prevent fraud transactions which cost them time and money to resolve.