Alert June 10, 2014

Federal Reserve Board Finalizes Rule Amending Red Flags Rule

The FRB repealed its several regulations including Regulation DD, Truth in Savings and, Regulation P, Privacy of Consumer Financial Information. The Dodd-Frank Act granted rulemaking authority for a number of consumer financial protection laws to the CFPB. The CFPB adopted interim final rules substantially similar to the FRB’s Regulation DD and Regulation P, and as a result, the FRB repealed its Regulation  DD and Regulation P.

In conjunction with the repeal of Regulations DD and P, the FRB also issued final amendments to its Identity Theft Red Flags rule in Regulation V, the implementing regulation for the Fair Credit Reporting Act. The Identity Theft Red Flags rule requires financial institutions and creditors to adopt identity theft prevention programs. The amendments to the rule amend the definition of “creditor” and updates a cross-reference in Supplement A to Appendix J to reflect a transfer of rulemaking authority to the CFPB. In particular, the amendments clarify in amending the definition of “creditor” and in connection with certain amendments to the Fair Credit Reporting Act, that the Red Flags rule only applies to creditors that regularly extend credit or obtain consumer reports in the ordinary course of their business to reflect a transfer of rulemaking authority to the CFPB. The Identity Theft Red Flags rule, however, still applies to all financial institutions whether they meet the revised definition of “creditor.”

The repeal of Regulation DD and Regulation P and the amendment to the Identity Theft Red Flags rule become effective on June 30, 2014.