FACTA and Red Flag Rule Postponed

New FACTA rules from the FTC scheduled to go into effect Nov. 1 are being delayed until June 1, 2010. Under the new rule small businesses that provide credit to customers or use credit reports are required to implement a written Identity Theft Protection Program.  

Basically the plan should do four key things:

1.  Identify potential red flags. Including written notices from credit reporting agencies and suspicious account activity.
2. Establish procedures to identify the red flags from step 1.
3. Implement appropriate action when a red flag is detected. A plan should be in place to contact the customer, law enforcement and cancel the account (if necessary). 
4. Include a timeline for a review of the plan.

Small businesses that do not have a plan in place by the June 1, 2010 deadline could face civil penalties up to $3,500 for a single violation. The Federal Trade Commission has published a guide to help businesses develop and implement a plan. 

A Warning for Small Biz Owners Looking for Investors

Thanks to new evidence from researchers at North Carolina State University investors can spot a good business investment over a fraudulent one. Companies that commit fraud can find innovative ways to fudge the numbers, making it hard to tell something is wrong by just looking at their financial statements. But research from North Carolina State University unveils a new warning system that sees through accounting tricks by evaluating things that are easily verifiable, such as the number of employees or the square footage that a company owns. If a company says that its profits are up, but these nonfinancial measures (NFMs) are down, that’s a sign something is probably wrong. 

For example, researchers found a difference of approximately 4 percent between revenue growth and employee growth in companies that did not commit fraud. The difference between revenue growth and employee growth in fraudulent companies was 20 percent.