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 money wire service?

Question

Options

• AIt mandates the use of updated technology for securing credit records
• BIt requires the owner to implement an identity theft warning system
• CIt is not usually enforced in the case of a small financial institution
• DIt does not apply because the owner is not a creditor

• A
  6% (2)
• B
  12% (4)
• C
  3% (1)
• D
  79% (26)

Explanation

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 account. 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 credit. 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 account. A money wire service is a service that allows customers to send or receive money electronically. 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.

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