- City must comply with federal law to protect utility users from identity theft
By Myrna Trauntvein
There is a new federal law that requires Nephi City to put into effect a policy to protect utility users from identity theft.
“The Federal Trade Commission issued regulations known as ‘Red Flag Rules’ on November 9. 2007, requiring financial institutions and creditors that hold consumer accounts to develop and implement a written Identify Theft Prevention Program,” said Denton Hatch, city attorney.
Hatch said the rules became effective January 1 of this year and compliance is required by November 1, 2008.
The Federal Trade Commission is authorized to commence action in a federal district court in the event of knowing a violation of the Fair and Accurate Credit Transaction Act, he said.
“Civil penalties may be imposed up to $2,500 per violation,” Hatch said.
Hatch instructed the city council to appoint a committee to develop, implement and administer and identity theft protection for the city.
Users of consumer reports who fail to comply with the address discrepancy regulations are subject to civil liability under Sections 616 and 617 of the Fair Credit Reporting Act up to $1,000 per violation.
Hatch said that the program must provide for the identification, detection and response to patterns, practices or specific activities know as “red Flags” that could indicate identity theft.
Council members agreed and appointed Blair Painter, finance director and city recorder, Linda Wilson, treasurer, and Hatch to compose the committee.
The committee will now propose a plan that the council will approve before it is implemented.
“The regulations additionally require financial institutions and creditors to develop reasonable policies to verify the identity of a consumer when a notice of address discrepancy is received from a consumer reporting agency,” said Hatch.
The rules apply to financial institutions and creditors with covered accounts.
A creditor includes utility and telecommunications companies. Where nonprofit and government entities defer payment for goods or service, they are considered creditors.
A covered account, where it applies to cities, is one that involves or is designed to permit multiple payments or transactions.
But the rules also cover any account that gas a reasonably foreseeable risk to customers as to the safety and soundness of the creditor.
“The program must include reasonable policies and procedures to identify relevant red flags for covered accounts signaling possible identity theft and incorporate those red flags into the program; Detect red flags that have been incorporated into the program; respond appropriately to any red flags that are detected to prevent and mitigate identity theft; and ensure the program is updated periodically to reflect changes in risks,” said Hatch.
One of the rules is that the city council must approve the initial written program.
The governing body, or a designated employee at the level of senior management must be involved in the development and oversight of the program.
Staff must be trained.
“If an identity theft could be tracked back to the city, the city could be liable,” said Hatch.
Oversight of service provider arrangements must be exercised.
The address discrepancy rules require all users of consumer reports to develop policies and procedures designed to enable the user to form a reasonable belief that a credit report relates to the consumer for who is was requested.
The city will, under guidelines of the law, develop a procedure for identification of relevant red flags and a procedure to deter them. It will provide for appropriate responses to red flags and will provide periodic updating of the program to reflect changes in risks to consumers.
An annual report will be made to the governing body or senior management.
This does not cover the kind of theft stolen from a mailbox. It does concern identify theft which occurs over a computer.
“We do not accept credit cards for utility payments at this time,” said Blair Painter.
That provided a further protection to consumers.