Red Flags Rule: Comply Now, Avoid Lawsuit Later

The scenario is far too familiar: Patient gets a call from a hospital about a bill. Patient says they never went to the hospital. Hospital says they did.

Now you've got a case of healthcare identity theft—and maybe a class action lawsuit.

Compliance with the Federal Trade Commission's new Red Flags Rule is critical for healthcare organizations—regardless whether the FTC postponed its enforcement date to August 1. The compliance date is actually November 1, 2008. That hasn't changed.

Sai Huda, chairman and CEO of Compliance Coach, a San Diego software company that specializes in automated regulatory compliance solutions, says bluntly of the FTC's enforcement delay: "So what? Anyone who is out of compliance is out of compliance."

Patients seeking damages from hospitals in identity theft cases have a leg up against hospitals that have yet to comply with the Red Flags Rule, Huda says. Health Leaders Media

Red Flags Rule entension proliferates medical identity theft

For a fourth time, the Federal Trade Commission (FTC) has delayed enforcement of the Red Flags Rule, an identity theft law--now until June 1, 2010. The FTC announcement came late this afternoon. The Red Flags Rule is a law intended to help control the spread of identity theft.

The rule was scheduled to be enforced for millions of businesses on November 1, 2008, but FTC enforcement has been extended on four separate occasions. The rule has been in effect for those financial institutions regulated by federal banking and credit union authorities since the original deadline. There has been controversy surrounding enforcement of the rule for other types businesses regulated by the FTC.

Under the law, businesses that allow customers to purchase goods or services on credit must take reasonable and appropriate steps to authenticate that they are extending credit to a real person and not an identity thief. San Francisco Examiner

FTC Extends Enforcement Deadline for Identity Theft Red Flags Rule

UPDATE: Red Flags Rule walks away from yet another deadline...

At the request of Members of Congress, the Federal Trade Commission is delaying enforcement of the “Red Flags” Rule until June 1, 2010, for financial institutions and creditors subject to enforcement by the FTC.

The Rule was promulgated under the Fair and Accurate Credit Transactions Act, in which Congress directed the Commission and other agencies to develop regulations requiring “creditors” and “financial institutions” to address the risk of identity theft. The resulting Red Flags Rule requires all such entities that have “covered accounts” to develop and implement written identity theft prevention programs to help identify, detect, and respond to patterns, practices, or specific activities – known as “red flags” – that could indicate identity theft.

The Commission previously delayed the enforcement of the Rule for entities under its jurisdiction until November 1, 2009. The Commission staff has continued to provide guidance to entities within its jurisdiction, both through materials posted on the dedicated Red Flags Rule Web site (www.ftc.gov/redflagsrule), and in speeches and participation in seminars, conferences and other training events to numerous groups. The Commission also published a compliance guide for business, and created a template that enables low risk entities to create an identity theft program with an easy-to-use online form. FTC staff has published numerous general and industry-specific articles, released a video explaining the Rule, and continues to respond to inquiries from the public. To assist further with compliance, FTC staff has worked with a number of trade associations that have chosen to develop model policies or specialized guidance for their members.

On October 30, 2009, the U.S. District Court for the District of Columbia ruled that the FTC may not apply the Red Flags Rule to attorneys. Today’s announcement that the Commission will delay enforcement of the Rule until June 1, 2010, does not affect the separate timeline of that proceeding and any possible appeals. Nor does it affect other federal agencies’ ongoing enforcement for financial institutions and creditors subject to their oversight.

The Federal Trade Commission works for consumers to prevent fraudulent, deceptive, and unfair business practices and to provide information to help spot, stop, and avoid them. To file a complaint in English or Spanish, visit the FTC’s online Complaint Assistant or call 1-877-FTC-HELP (1-877-382-4357). The FTC enters complaints into Consumer Sentinel, a secure, online database available to more than 1,700 civil and criminal law enforcement agencies in the U.S. and abroad. The FTC’s Web site provides free information on a variety of consumer topics. FTC Red Flags


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(Red Flags October 09)