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R-1028 - 10/28/2008 - GENERAL LEGISLATION FEDERAL - Resolutions Supporting Documents•o v� 07E 0UNT AGENDA ITEM Regular Board of Trustees Meeting of October 28, 2008 SUBJECT: Idendity Theft Prevention ( "Red Flag ") Policy FROM: Darrell Langlois BUDGET SOURCE/BUDGET IMPACT: N/A ITEM 10.B -2) es o °i� it RECOMMENDED MOTION: I move that the Village Board adopt Resolution 2008 -GL- FED- FIN -R -1028, A Resolution Adopting and Implementing an Identity Theft Prevention Policy. Background/History: The Village of Oak Brook is required by law to adopt an Identity Theft Prevention ( "Red Flag ") Policy by November 1, 2008. Attached is a memorandum from Mark Sterk that provides background information on this subject as well as the proposed resolution. Once approved by the Village Board, the appropriate Village staff will be trained on this new policy. As a practical matter, we take very little personal information from water utility customers so this new policy should not have a big impact on our operations. Recommendation: I recommend approval of Resolution 2008 -GL- FED -FIN -R -1028, A Resolution Adopting and Implementing an Identity Theft Prevention Policy. Last saved by Default J \WORD \redflagboardcover doc Last printed 10/22/2008 2 15 PM We kon ANEYS AT LAW k f Ltd. TO: David Niemeyer Darrell Langlois FROM: Mark H. Sterk Matthew Welch DATE: October 21, 2008 RE: Federal Identity Theft Prevention Regulations 3318 WEST 95TH STREET EVERGREEN PARK, IL 60805 (708) 424 -5678 FAX (708) 425 -1898 %,nmodelsonstak.com The purpose of this memorandum is to provide a brief overview of the Identity Theft Prevention Regulations, 16 C.F.R. Part 661, ( "Regulations ") promulgated by the Federal Trade Commission. Covered municipalities are required to implement the Regulations by November 1, 2008. Attached is an Identity Theft Policy implementing the Regulations. Please review the following for general guidance in the implementation of the Regulations. I. Purpose The Regulations require creditors to develop and implement a written Identity Theft Prevention Policy ( "Policy ") to detect, prevent, and mitigate identity theft in connection with the opening of certain accounts or certain existing accounts. The mandatory compliance date for the Regulations is November 1, 2008. Each creditor must incorporate into its Policy relevant indicators of a possible risk of identity theft ( "Red Flags "). The Policy must contain reasonable policies and procedures to: • Identify relevant Red Flags for covered accounts and incorporate those Red Flags into the Policy; • Detect Red Flags that have been incorporated into the Policy; • Respond appropriately to any Red Flags that are detected to prevent and mitigate Identity Theft; and • Ensure the Policy is updated periodically, to reflect changes in risks to customers or to the safety and soundness of the financial institution or creditor from identity theft. There is no private right of action against a municipality for failure to enact a Policy by November 1, 2008. However, the Federal Trade Commission is authorized to commence action in a federal district court in the event of a knowing violation of the Regulations. Finally, civil penalties for violations are capped at $2,500.00 per offense. II. Why Are Certain Municipalities Considered Creditors? The Regulations apply to "financial institutions" and "creditors" that have "covered accounts ". Therefore, a municipality will be subject to the Regulations if it is a "creditor" with "covered accounts ". 0 cjQMp day coe;w--,, ATTORNEYS AT LAW Ltd. Federal statute defines the term "creditor" as any person who regularly extends, renews, or continues credit, or any person who regularly arranges for the extension, renewal, or continuation of credit. "Person" means a natural person, a corporation, government or governmental subdivision or agency, trust, estate, partnership, cooperative, or association. "Credit" is defined as any right granted to defer payment of debt. Accordingly, where governmental entities defer payment for goods or services, they are considered creditors.' A "covered account" is an account used mostly for personal, family, or household purposes, and that involves multiple payments or transactions, or any other account a creditor offers or maintains for which there is a reasonably foreseeable risk to customers or to the safety and soundness of the Village from Identity Theft. Therefore, municipalities that, for example, provide water, sanitary sewer, and/or waste services and bill for those services are creditors subject to the regulations. III. The Attached identity Theft Policy Although the federal regulations do not require the Policy to be adopted in the form of an ordinance, the Policy must be formally adopted by the governing body by November 1, 2008. As such, the Attached Identity Theft Policy ( "Attached Policy ") is presented as a resolution in order to provide the Village with more flexibility in the implementation and enforcement of the Regulations. Section two lays out the intent of the policy, which is to implement the four goals identified above, in order to prevent identity theft and bring the municipality in compliance with federal law. Section three identifies key definitions necessary to understand the extent of the policy. Thereafter, Sections four through nine identify specific procedures to implement the four goals of the Regulations. IV. Summary It is possible that provisions in the Attached Policy will not be applicable to the operations of the municipality, or that additional measures may be required. Accordingly, we recommend that the Attached Policy be reviewed by the responsible personnel to ensure it meets the needs of the municipality's internal operations. Please call either of us if you have any questions. S:Wanetl0ak BraaklCortmemo to niemeyer re identity theft.doc � FTC Business Alert, June 2008, http./hvww.ftc gov /bcp cdu/ Rubs /business/alerts /alt05O.shtm Page 2 of 2 ® at'= 445 RESOLUTION 2008 -GL- FED - FIN -R -1028 A RESOLUTION ADOPTING AND IMPLEMENTING AN IDENTITY THEFT PREVENTION POLICY WITHIN THE VILLAGE OF OAK BROOK, COOK AND DUPAGE COUNTIES, ILLINOIS WHEREAS, pursuant to the Fair and Accurate Credit Transactions Act of 2003, the Federal Trade Commission adopted Identity Theft Rules requiring the creation of certain policies relating to the prevention and mitigation of identity theft (the "FTC Regulations "), and WHEREAS, the FTC Regulations require creditors to adopt red flag policies to identify, detect, prevent and mitigate such identity theft with respect to information used in covered accounts, and WHEREAS, the Village of Oak Brook (the "Village ") is a creditor, with respect to the FTC Regulations, by virtue of providing utility services and by providing services to citizens and accepting multiple payments for such services in arrears, and WHEREAS, pursuant to the FTC Regulations, such an arrangement between the Village and its citizens constitutes a covered account, and WHEREAS, the President and the Board of Trustees, after due consideration, find and determine that it is in the best interests of the health, safety and welfare of its residents to approve and adopt red flag policies to identify, detect, prevent and mitigate identity theft with respect to information used in covered accounts NOW, THEREFORE, BE IT RESOLVED by the President and the Board of Trustees of the Village of Oak Brook, Cook and DuPage Counties, Illinois, as follows Section 1 Incorporation That the recitals set forth above are incorporated herein and made a part hereof Section 2 Identity Theft Prevention Policy The Village adopts this Identity Theft Prevention Policy, identified herein, in order to prevent and mitigate identity theft by identifying and detecting identity theft red flags and by responding to such red flags in a manner that will prevent such identity theft Section 3 Definitions For the purposes of this policy, the following words and phrases shall have the following meanings when used herein RESOLUTION 2008 -GL- FED - FIN -R -1028 Resolution Adopting & Implementing Identity Theft Prevention Policy Page 2 of 6 a "Covered Account" means i) an account the Village offers or maintains primarily for personal, family or household purposes that involves multiple payments or transactions, and ii) any other account the Village offers or maintains for which there is a reasonably foreseeable risk to customers or to the safety and soundness of the Village from Identity Theft b Identity Theft" means fraud committed using Identifying Information of another person c "Identifying Information" means any name or number that may be used alone or in conjunction with any other information, to identify a specific person, including but not limited to name, address, telephone number, social security number, date of birth, government issued driver's license, employer or taxpayer identification number, credit card account information, debit card information, and bank account information d "Policy" means the Identity Theft Prevention Policy, identified herein e "Red Flag" means a pattern, practice, or specific activity that indicates the possible existence of identity theft f "Village" means the Village of Oak Brook Section 4 Identification of Red Flags In order to identify relevant Red Flags, the Village considers the types of covered accounts that it offers and maintains, the methods it provides to open such covered accounts, the methods it provides to access such covered accounts, and its previous experiences with Identity Theft The Village identifies the following Red Flags, in each of the listed categories a Notifications and Warnings From Credit Report Agencies 1 Report of fraud accompanying a credit report, 2 Notice or report from a credit agency of a credit freeze on a customer or applicant, 3 Notice or report from a credit agency of an active duty alert for an applicant, and 4 Indication from a credit report of activity that is inconsistent with a customer's usual pattern or activity b Suspicious Documents 1 Identification document or card that appears to be forged, altered or inauthentic, 2 Identification document or card on which a person's photograph or physical description is not consistent with the person presenting the document, 3 Other document with information that is not consistent with existing customer information (such as if a person's signature on a check appears forged), and 4 Application for service that appears to have been altered or forged c Suspicious Personal Identifying Information 2 RESOLUTION 2008 -GL- FED - FIN -R -1028 Resolution Adopting & Implementing Identity Theft Prevention Policy Page 3 of 6 1 Identifying Information presented that is Inconsistent with other information the customer provides (example Inconsistent birth dates), 2 Identifying Information presented that Is Inconsistent with other sources of Information (for Instance, an address not matching an address on a credit report), 3 Identifying information presented that is the same as information shown on other applications that were found to be fraudulent, 4 Identifying information presented that is consistent with fraudulent activity (such as an invalid phone number or fictitious billing address), 5 Social security number presented that is the same as one given by another customer, 6 An address or phone number presented that is the same as that of another person, 7 A person falls to provide complete personal identifying Information on an application when reminded to do so (however, by law social security numbers must not be required), and 8 A person's Identifying information is not consistent with the information that is on file for the customer d Suspicious Account Activity or Unusual Use of Covered Accounts 1 Change of address for a covered account followed by a request to change the covered account holder's name, 2 Payments stop on an otherwise consistently up -to -date covered account, 3 Covered account used in a way that is not consistent with prior use (example very high activity), 4 Mail sent to the covered account holder is repeatedly returned as undeliverable, 5 Notice to the Village that a customer is not receiving mail sent by the City, 6 Notice to the Village that a covered account has unauthorized activity, 7 Breach in the Village's computer system security, and 8 Unauthorized access to or use of identifying information e Alerts from Others 1 Notice to the Village from a customer, Identity theft victim, law enforcement or other person that it has opened or is maintaining a fraudulent covered account for a person engaged in Identity Theft Section 5 Detecting Red Flags a New Covered Accounts. In order to detect any of the Red Flags identified In Section 4 associated with the opening of a new covered account, Village personnel will take the following steps to obtain and verify the identity of the person opening the account 3 RESOLUTION 2008 -GL- FED - FIN -R -1028 Resolution Adopting & Implementing Identity Theft Prevention Policy Page 4 of 6 1 Require certain identifying information such as name, date of birth, residential or business address, principal place of business for an entity, driver's license or other identification, 2 Verify the customer's identity (for instance, review a driver's license or other identification card), 3 Review documentation showing the existence of a business entity, and 4 Independently contact the customer b Existing Covered Accounts. In order to detect any of the Red Flags identified in Section 4 for an existing covered account, Village personnel will take the following steps to monitor transactions with an account 1 Verify the identification of customers if they request information (in person, via telephone, via facsimile, via email), 2 Verify the validity of requests to change billing addresses, and 3 Verify changes in banking information given for billing & payment purposes Section 6 Preventing and Mitigating Identity Theft In the event Village personnel detect any identified Red Flags, such personnel shall take one or more of the following steps, depending on the degree of risk posed by the Red Flag 1 Continue to monitor a covered account for evidence of Identity Theft, 2 Contact the customer, 3 Change any passwords or other security devices that permit access to covered accounts, 4 Not open a new covered account, 5 Close an existing covered account, 6 Reopen a covered account with a new number, 7 Notify the Finance Director for determination of the appropriate step(s) to take, 8 Notify law enforcement, or 9 Determine that no response is warranted under the particular circumstances Section 7 Protecting Customer Identifying Information In order to further prevent the likelihood of Identity Theft occurring with respect to Village covered accounts, the Village will take the following steps with respect to its internal operating procedures to protect customer identifying information 1 Ensure that its website is secure or provide clear notice that the website is not secure, RESOLUTION 2008 -GL- FED - FIN -R -1028 Resolution Adopting & Implementing Identity Theft Prevention Policy Page 5 of 6 2 Ensure complete and secure destruction of paper documents and computer files containing customer information, 3 Ensure that office computers are password protected and that computer screens lock after a set period of time, 4 Ensure storage rooms, cabinets, drawers, and other storage space containing identifying information will be locked when not in use, 5 Keep offices clear of papers containing customer information, 6 Request only the last 4 digits of social security numbers (if any), 7 Ensure computer virus protection is up to date, and 8 Require and keep only the kinds of customer information that are necessary for utility purposes Section 8 Program Updates The Finance Director will periodically review and update this Policy to reflect changes in risks to customers and the soundness of the Village from Identity Theft In doing so, the Finance Director will consider the Village's experiences with Identity Theft situations, changes in Identity Theft methods, changes in Identity Theft detection and prevention methods, and changes in the Village's business arrangements with other entities After considering these factors, the Finance Director will determine whether changes to the Policy, including the listing of Red Flags, are warranted if warranted, the Finance Director will present his or her recommended changes to the President and Board of Trustees, which will make a determination of whether to accept, modify or reject those changes to the Policy Section 9 Policy Administration. Responsibility for developing, implementing and updating this Policy lies with the Finance Director, subject to approval by the President and Board of Trustees The Finance Director will be responsible for the Policy administration, for ensuring appropriate training of Village staff on the Policy, for reviewing any staff reports regarding the detection of Red Flags and the steps for preventing and mitigating Identity Theft, determining which steps of prevention and mitigation should be taken in particular circumstances and considering periodic changes to the Policy a Staff Training and Reports. Village personnel responsible for implementing the Policy shall be trained either by or under the direction of the Finance Director in the detection of Red Flags, and the responsive steps to be taken when a Red Flag is detected b Service Provider Arrangements In the event the Village engages a service provider to perform an activity in connection with one or more accounts, the Village will take the following R RESOLUTION 2008 -GL- FED - FIN -R -1028 Resolution Adopting & Implementing Identity Theft Prevention Policy Page 6 of 6 steps to ensure the service provider performs Its activity in accordance with the Policy set forth herein 1 Require, by contract, that service providers have such policies and procedures in place, and 2 Require, by contract, that service providers review the Village's Policy and report any Red Flags to the Finance Director SECTION 10 If any section, paragraph, clause or provision of this resolution shall be held invalid, the invalidity thereof shall not affect any of the other provisions of this resolution conflict SECTION 11 All resolutions in conflict herewith are hereby repealed to the extent of such SECTION 12 This resolution shall be in full force and effect from and after its passage, approval and publication as provided by law APPROVED THIS 28th day of October, 2008 PASSED THIS 28th day of October, 2008 Ayes Nays Absent John W Craig Village President ATTEST Charlotte K Pruss Village Clerk rol