Archive for October, 2009
Final Deadline to Implement Identity Theft Red Flags Rules for FTC-Regulated Entities is November 1, 2009
The new deadline to implement the Federal Trade Commission (FTC) rules on Identity Theft Red Flags is November 1, 2009. (To access the FTC’s FAQs on the Red Flags Rules, click here. To access the text of the Red Flags Rule, click here. And for the FTC’s “How To” guide for businesses, click here).
These rules have a surprisingly wide application to businesses, many of whom don’t think of themselves as “creditors.” Under the rules, any “creditor” with “covered accounts” must develop and implement a Red Flags Program. Since these terms are broadly defined, the FTC estimated that over 11 million entities subject to its jurisdiction would qualify as “creditors” under the rules. A s a result, you may very well be a creditor under the rules.
Creditors
A “creditor” includes any entity that allows customers to defer payment for goods and services (including through the common practice of billing customers after goods or services are provided), even if no finance charges or installment payments are involved. Such entities include, for example, health care providers, mortgage brokers, utility companies and many merchants who wouldn’t ordinarily think of themselves as “creditors.”
Covered Accounts
If you are a creditor under the Red Flags Rules, you must next determine if you have any “covered accounts.” “Covered accounts” are not limited to formal deposit or credit accounts. Instead, any continuing relationship under which a customer can obtain goods or services that are primarily for personal, family or household purposes and that involves, or is designed to permit, multiple payments or transactions is a “covered account.” In addition, a “covered account” is any account (including a business account) for which there is a reasonably foreseeable risk to you or your customers from identity theft. To determine if there is a foreseeable risk from identity theft, consider the methods used to open the account, the methods used to access the account and your previous experience with identity theft.
The Red Flags Program
If you are a creditor who does not have any covered accounts, you do not need to develop a Red Flags Program. However, the rules require that you periodically reevaluate whether you are offering or maintaining covered accounts. If you ever determine that you offer or maintain covered accounts, then you will need to develop and implement a Red Flags Program.
If you are a creditor with covered accounts, you will need develop and implement a written Red Flags Program. The program must be designed to identify, detect and respond to patterns, practices or specific activities that could indicate identity theft. There is no one-size-fits-all program and each creditor needs to tailor its program to its own circumstances. If you determine that you are a low-risk entity, then your program can be simple and streamlined.
If you have questions about the Red Flags Rules or would like a copy, please let us know. You need to act now to determine if you are a creditor and to comply with the Red Flags Rules.
For further information regarding this e-alert, contact Mark Hargrave or Selena Nelson. If you are a health care provider, contact Kirk Doan, Megan Snow or Patricia Zieg.
Add comment October 29, 2009
President Announces Community Bank Program to Increase Credit Flow to Small Businesses
The President announced plans today that, if put into action, would lead to the realization of at least some much-needed and long-sought-after assistance for community banks. A copy of the President’s announcement is available here. (Skip to Page 2 for Details).
According to the President’s proposal, which is part of the White House’s “Financial Stability Plan,” the program would target small business lending, but would also offer a mechanism for banks with less than $1 billion in assets to access capital with an annual dividend rate of 3%. The announcement is short on specifics, but here are the basics:
(1) Banks will receive capital in an amount equaling up to 2% of risk-weighted assets;
(2) The annual dividends on the capital will equal 3% for the first five years and 9% thereafter; and
(3) Banks seeking to participate in the program will submit a “small business lending plan” in which the bank explains how additional capital will help increase its lending to small businesses. (Banks approved for the program that elect to participate will also be required to follow up with quarterly reports detailing small business activities).
Over the next few weeks, Treasury will work with community banks and the small business community to hammer out the program’s specifics. Notably, the release contemplates that banks already participating in the capital purchase program will be able to replace existing capital, which carries a 5% dividend (7.7% for S-Corps), with investments under the new program.
The President also announced support for legislation that would increase the size of key Small Business Administration (SBA) loans. The aim of the increase would (supposedly) allow the SBA to ensure that more small businesses can get access to credit.
The first prong of the proposed legislation would increase the Maximum 7(a) loan from $2 million to $5 million, providing greater access to capital that businesses could use to boost working capital as well as purchase machinery equipment and real estate.
The second prong of the proposed legislation would increase the maximum 504 project loan from $2 million to $5 million for standard borrowers (supporting a total project of $12.5 million) and from $4 million to $5.5 million for manufacturers (supporting a total project of $13.75 million), thereby increasing the qualifying borrowers’ ability to undertake larger projects.
And the third prong of the proposed legislation would increase the maximum loan size of the SBA microloan programs from $35,000 to $50,000.
Add comment October 21, 2009
Is TARP 2.0 in the Works for Community Banks? President Obama Indicates It Is.
The Associated Press is reporting that President Obama is forming a plan that would afford smaller community banks (a term he did not define) greater access to the TARP funds. The plan to grant broader access to TARP funds would come as part of a package developed by the Department of Treasury to increase credit access to small business—a package that would also increase the existing caps for SBA loans.
The AP’s report is short on details. If Treasury follows parameters set forth in a letter from the American Bankers Association to Secretary Tim Geithner, then banks with less than $5 billion in assets would be eligible. However, in recent congressional testimony, FDIC Chairman Sheila Bair spoke of extending TARP aid to community banks with less than $1 billion in assets. Bair also conveyed her desire to assist smaller banks, which have been hobbled by mounting losses on construction and commercial real estate loans.
Regardless of which banks ulitimately qualify, funds availability should pose no problem for the new program. After all, with more than $70 billion in repaid TARP funds, Treasury has approximately $320 billion to allocate.
Add comment October 20, 2009
