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CU attendees told to develop ID theft prevention
HOLLYWOOD, Fla. (6/20/08)--Credit unions should develop ID theft prevention measures based on their own ID theft situation, conference attendees were told Thursday at CUNA Mutual Group's Discovery Conference, meeting this week in Hollywood, Fla.
CUNA Mutual Risk Manager Ken Otsuka and National Association of State Credit Union Supervisors (NASCUS) Vice President Jenny Champagne discussed new identity theft "red flag" rules with Discovery Conference attendees Thursday. (Photo provided by CUNA Mutual Group)
Ken Otsuka, risk manager at CUNA Mutual, and Jenny Champagne, vice president of regulatory development and education at the National Association of State Credit Union Supervisors, outlined new identity theft "red flag" rules required by the Federal Trade Commission and other fed agencies by Nov. 1. They noted that proper implementation of sections 114 and 315 of the Fair and Accurate Credit Transactions Act of 2003 (FACT Act) will help protect credit unions and their members against identity theft. A successful ID theft prevention program will help credit unions mitigate reputation risk--a key aspect of examinations. “Regulators are also paying attention to due diligence, so a regular review of your ID theft program should include assessments of third-party service providers,” said Champagne. The FACT Act was signed into law in December of 2003. Its provisions giving consumers the right to receive a free credit report from the three major credit bureaus; requiring truncation of credit and debit card numbers on receipts; and providing ID theft victims the ability to place a fraud alert on their credit report. Section 114 requires credit unions to develop a written Identity Theft Prevention Program to detect, prevent, and mitigate identity theft related to new or existing covered accounts, Champagne said. “Covered accounts include business and consumer accounts such as credit cards, mortgage loans, automobile loans, margin accounts, cell phone accounts, utility accounts, checking accounts, and savings accounts,” she said. The prevention program must be approved by the credit union’s board and include policies and procedures that detect red flags and help answer the questions, "Who will be responsible for detecting red flags?" and "How will they detect the red flags?" Five categories of red flags include:
* Alerts, notifications, or warnings from a consumer reporting agency; * Suspicious documents; * Suspicious personal identifying information; * Unusual use of, or suspicious activity related to, the covered account; and * Notice from customers, victims of ID theft, law enforcement authorities, or other persons about possible ID theft connected to covered accounts.
Credit unions should be capable of responding appropriately to any red flags and should update their procedures periodically to reflect changes in risks from identity theft, Otsuka said. He cautioned there is not a one-size-fits-all solution. “The program must be tailored to the size of the credit union and the complexity of its operation. The credit union must also ensure oversight in the development, implementation and administration of the program, staff training and overseeing service provider arrangements.” Otsuka suggested forming a risk assessment team that would review all operational areas to identify the types of red flags that could surface in each area such as new accounts, loans or call centers. “A credit union should factor in its own experience with ID theft losses and consider credit union industry losses to the degree possible.” Staff training is critical. “It’s important for staff to first understand the various forms of identity theft, how they are perpetrated and the red flags that are raised within each type. If they understand the nature of the losses themselves, it will be easier for them to spot red flags,” he said.
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