The CFPB reports that identity theft is still a vexing problem for consumers. While often, the financial losses can be reversed—especially if the ID theft reveals itself in the form of a fraudulent credit card charge—the disruption, inconvenience, lost opportunities and anguish take a toll.  Correcting one’s credit record can be daunting.

There are several federal and state laws designed to address ID theft and fraud issues. The problem, however, is that for the most part, these laws are after-the-fact approaches. 

The Fair Credit Reporting Act provides a mechanism to place a fraud alert on one’s credit report and a credit or security freeze to lock-down the disposition of one’s credit information.   I wrote about these after-the-fact remedies in the past.  See Fraud Alerts and Security Freezes, Fraud Alerts and Security Freezes, Part 2A and Fraud Alerts and Security Freezes, Part 2B.  Fraud alerts and security freezes are for the most part requirements placed on the credit reporting agencies, rather than on creditors.

The obligation placed directly on creditors arises under the Federal Trade Commission’s Red Flags Rule. This is the rule that requires creditors to implement a written ID theft prevention program designed to detect the red flags of ID theft in the day-to-day operation of the business.  I wrote about this Rule early on in this Back to Basics Series: See Remember the Red Flags Rule? Hope so. 

Consumers have conditional rights of recovery of losses under the Truth-In-Lending Act if the fraudulent activity involves a credit card—and somewhat lesser protections if a debit card is involved.  The sooner fraud is discovered and reported by the consumer, the better the chances of recovery.  Of course, a consumer’s recovery does not necessarily help a merchant or a creditor.

The CFPB’s heightened interest in this area relates to servicemembers who are increasingly the victim of ID theft.  Because Servicemembers are often sent to remote deployments, they have even less of an opportunity to discover after-the-fact ID theft and fraud. 

The Federal Trade Commission is the agency primarily responsible for the Red Flag Rule’s compliance.  Based on the concerns reported about Servicemembers, I would not be surprised to learn that the CFPB takes a more direct supervisory and enforcement posture in this world of ID theft and fraud.

Please Note: This is the two hundred-forty-fifth blog in a series of Back to Basics blogs, in which relevant and resourceful information can be easily accessed by clicking Dentons - Consumer Finance Report.