What is a covered account?

A covered account is a financial account that falls under the regulations of the Federal Trade Commission's Red Flags Rule. These accounts are typically managed by financial institutions such as banks, credit unions, and investment firms. Some examples of covered accounts include credit card accounts, mortgage loans, and checking accounts. The Red Flags Rule requires that financial institutions implement an identity theft prevention program to protect these accounts from fraudulent activities. This program should be designed to detect, prevent, and mitigate identity theft risks associated with these accounts. It is important for financial institutions to regularly monitor these accounts for suspicious activity and promptly respond to any red flags that may arise. Failure to comply with the Red Flags Rule can result in fines and legal penalties.