BOZEMAN, Mont. — Zoot, a provider of advanced instant credit decisioning and loan origination solutions, recently announced the development of a Red Flag solution suite.

Based on industry best practices, Zoot said it has created a unique set of tools to help consumer credit granters comply with Red Flag regulations. Section 315 and Section 114(B) of the FACT Act mandate that financial institutions manage and reduce the risk of identity theft fraud for customers, the company noted.

Any organization, including non-lenders such as brokers and auto dealers, who use consumer credit data is required to comply with Red Flag regulations by Nov. 1 of this year.

To satisfy Red Flag requirements Zoot pointed out that programs must include the following: reasonable policies and procedures for detecting, preventing and mitigating identity theft; the ability to identify relevant patterns of activity considered red flags, including address discrepancies; and periodic updates to reflect changes in risks from identity theft.

"It's not uncommon for 20 percent of new consumer credit applications to contain a different address from the corresponding consumer credit file," said Larry Kahn, president of CreditQA. 

"By reconciling address discrepancies, financial institutions can increase their applicant pool, generating a higher percentage of offers presented and then accepted. Since the Red Flag requirement is new, lenders would be best served in choosing a comprehensive approach to red flag regulation that provides a favorable return on investment," he continued.

According to the company, Zoot's Red Flag solution increases automation, reduces the number of applications manually reviewed for address issues and ultimately decreases the cost per booked account.

Zoot's Red Flag solution provides:

—Intelligent, automated workflow capable of identifying Red Flag indicators and obtaining relevant data from appropriate vendors based on the contents of consumer applications.

—Shared logic, used for both instant prescreen and consumer-initiated inquiries, that can be easily modified by business users.

—A comprehensive approach applicable to all channels and lines of business with the ability to interface with any existing system.

—A product roadmap that ensures Red Flag programs are updated periodically to reflect new identity theft risks.
According to Jeffrey Taft, a partner in the law firm of Mayer Brown LLP, "The dramatic increase in fraud and identity theft has made the development of an identity theft prevention program an important compliance and risk management initiative for all institutions.

"While compliance with the Red Flag regulations is not mandatory until Nov. 1, 2008, the development of a comprehensive program will require significant time and resources.  Institutions should be identifying their relevant Red Flags and compliance strategies, so they are ready by the implementation date," he highlighted.

The benefits of Zoot's Red Flag solution include seamless integration with current Zoot client platforms or existing decisioning platforms for non-Zoot clients; enhanced consumer protection and quality of credit data; and the ability for lenders to process more applications, ultimately increasing ROI, executives explained.

Zoot went on to say that it maintains a commitment to long-term enhancements of the solution, allowing companies to preserve a high level of fraud detection.

To learn more about Red Flags attend the Webinar "Five Things You Need to Know about Red Flag Compliance" on April 29 from noon to 1:00 pm MT.

Presenters will include Taft and Tom Johnson, vice president of product development at Zoot. Registration is available through this link.