ID Theft Red Flags FAQ IIB7 – To what extent does a trust account fall within the definition of “covered account?”

Compliance > Lending > FCRA
Q:  To what extent does a trust account fall within the definition of “covered account?”
 
A:  There are many types of trust accounts, which may be established for business or consumer purposes.  The features and risks of a trust account will determine whether it is a “covered account.”
 
For instance, a trust account may constitute an “account” because it involves a continuing relationship established by a person with a financial institution or creditor to obtain a product or service for personal, family, household, or business purposes.  Such a trust account will qualify as a “covered account” under the first part of the definition of a “covered account” (set out above under II.B.1) if it is offered primarily for personal, family, or household purposes and it involves or is designed to permit multiple payments or transactions, such as deposits by the grantor, stock trades, and payments to beneficiaries.  For other types of trust accounts, such as business trust accounts, each financial institution or creditor must determine whether the account presents a reasonably foreseeable risk to customers or to the safety and soundness of the financial institution or creditor from identity theft, as required under the second part of the definition of “covered account.”
 
 
ADDITIONAL INFORMATION:
This information was obtained from the Interagency FAQs for Identity Theft Red Flags and Address Discrepancies - https://www.federalreserve.gov/newsevents/pressreleases/files/bcreg20090611a1.pdf
 

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