Despite the fact that Blondie (our golden retriever) gets credit card applications in the mail, identity theft is not a concern for her.
First off, you’d probably be suspicious if she came in and plopped her Mastercard down on the counter and ordered the prime rib, despite those sad Golden Retriever eyes that the ladies at the Wells Fargo drive-up just can’t resist (result: Milk Bone overload).
For the people who visit your place, you might be a little less diligent when presented a card, even though it isn’t supposed to be that way.
What do I mean? The last time I read my American Express merchant agreement, it had a clause in it that says something along the lines of “you must ask the cardholder for a photo ID every time you accept the card”. I can count
on one finger the times I’ve been asked since 1983.
Businesses likely see that as an opportunity to offend their clientele. Customers might be annoyed until you say “we do this to make sure that someone else isn’t using your card”, which should defuse the matter with most folks.
As identify theft increases, the financial industry (and Congress) responds with more rules.
You’re probably already aware of PA-DSS certification, which are security requirements of the credit card industry. If your business doesn’t meet two rapidly approaching deadlines, taking credit cards can become a thing of the past for your business. Ouch.
Next, there’s FACTA, the Fair and Accurate Credit Transactions Act of 2003. You’ll also hear it called “The FTC Red Flags Rule” or just “Red Flags”.
Banks have been dealing with FACTA since 2003. That’s why you get those phone calls from the bank asking if they can scan your driver’s license or other official ID. The idea is that this allows the bank to quickly compare the scanned copy of your ID on file with the one presented to the teller by someone who looks nothing like you.
Now it’s your turn.
So how does all this impact the small business owner?
FACTA applies to any business that provides goods and services to consumers and bills them later (mostly). Implementation for small businesses keeps getting delayed, for what are probably obvious reasons, but they say they’re serious that the November 1, 2009 deadline is the real deal.
Here’s what the FTC website says about the Red Flag Rule:
Quote:The Rule applies to ‘financial institutions’ and ‘creditors.’ It’s important to look closely at how the Rule defines those terms because (emphasis mine) they apply to groups that might not typically use those words to describe themselves.
Continuing later:
Quote:Under the Rule, the definition of ‘creditor’ is broad, and includes businesses or organizations that regularly provide goods or services first and allow customers to pay later. Examples of groups that may fall within this definition are utilities, health care providers, lawyers, accountants, and other professionals, and telecommunications companies. The definition also covers businesses or organizations that regularly grant loans, arrange for loans or the extension of credit, or make credit decisions. Examples include finance companies, mortgage brokers, and automobile dealers or retailers that offer financing or collect or process credit applications for third party lenders. In addition, the definition includes anyone who regularly participates in the decision to extend, renew, or continue credit, including setting the terms of credit.
As you can see, what the law calls “credit” and what you and I might call it are two different things, so I strongly suggest you read the FTC documents.
One last quote: The Red Flags Rule applies to businesses that regularly defer payment until after services have been performed.
Thankfully, it doesn’t appear to apply to businesses who take a credit card number and charge it monthly until your balance is paid off (PA-DSS deals with that), nor to businesses who credit invoice payments from a retainer.
You can learn more at http://www.ftc.gov/redflagsrule
PS: Community benefit organizations (also known by the misnomer of “non-profits”) are also subject the Red Flags Rule. Even the City of Columbia Falls is considered a grantor of credit by FACTA, because they bill for water/sewer based on the amount used last month.
Want to learn more about Mark or ask him to write about a business, operations or marketing problem? See Mark’s site or contact him via email at mriffey at flatheadbeacon.com.