Federal Red Flags Rule Update: Change In Effective Date

In a previous newsletter distributed in September 2009, an article entitled “Federal Red Flags Rule: Does it Apply to Community Associations?” indicated that all covered entities would be required to comply with the Red Flags Rule as of August 1, 2009. However, Congress urged the Federal Trade Commission (FTC) to delay the enforcement of the Red Flags Rule (RFR) until June 1, 2010. 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.

The updates on the rules also noted that timelines related to appeals and proceedings will not be affected due to the delay in enforcement of the Red

Flags Rule. In addition, any other federal entity conducting an investigation will not be affecting by

the delays in the FTC Red Flags Rule.

The FTC is working with trade professionals and other entities in order to establish specific, model policies regarding program outlines. Some trade-specific guidelines have been established, as well as conferences to educate covered institutions. If any model policies are adopted for community associations, we will be sure to update you immediately.

On October 20, 2009, the House of Representatives voted to extend the effective enforcement date of the Federal Red Flags rule to June 1,

2010. Due to a variation in the rules

specifically exempting legal, accounting and health care practices with fewer than 20 employees, Congressional members decided that enforcing the Red Flags Rule against

entities that would not be covered effective June 1, 2010, would be unfounded and expensive.

Moreover, the majority of enforcement will most likely be targeted at larger financial institutions and entities with frequent complaint filings.

For more information about the Federal Red Flags Rule, and any changes that your community association may need to know, please visit FTC’s website: http://ftc.gov/redflagsrule

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