In what way does the “Red Flags Rule” under the Fair and Accurate Credit Transactions Act (FACTA) relate to the owner of a grocery store who uses a…

The Red Flags Rule is a regulation that requires financial institutions and creditors to implement a

written identity theft prevention program that is designed to detect, prevent, and mitigate identity

theft in connection with the opening of a covered account or any existing covered account1. A

creditor is 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 credit2. A covered account is an

account that a financial institution or creditor offers or maintains, primarily for personal, family, or

household purposes, that involves or is designed to permit multiple payments or transactions, such

as a credit card account, mortgage loan, automobile loan, margin account, cell phone account, utility

account, checking account, or savings account2. A money wire service is a service that allows

customers to send or receive money electronically3. The owner of a grocery store who uses a money

wire service is not a creditor because he or she does not regularly extend, renew, or continue credit

to customers. Therefore, the Red Flags Rule does not apply to the owner of a grocery store who uses

a money wire service. Reference:

1: FTC, Red Flags Rule, https://www.ftc.gov/business-guidance/privacy-security/red-flags-rule

2: FTC, Fighting Identity Theft with the Red Flags Rule: A How-To Guide for Business,

https://www.ftc.gov/tips-advice/business-center/guidance/fighting-identity-theft-red-flags-rulehow-guide-business

3: Alessa, Wire Transfer Red Flags: Understanding Money Laundering and Fraud Risks,

https://alessa.com/webinars/wire-transfer-red-flags-and-fraud-risks/