Appendix J to Part 717 - Interagency Guidelines on Identity Theft Detection, Prevention, and Mitigation
12:7.0.2.3.19.3.11.3.23 : Appendix J
Appendix J to Part 717 - Interagency Guidelines on Identity Theft
Detection, Prevention, and Mitigation
Section 717.90 of this part requires each federal credit union
that offers or maintains one or more covered accounts, as defined
in § 717.90(b)(3) of this part, to develop and provide for the
continued administration of a written Program to detect, prevent,
and mitigate identity theft in connection with the opening of a
covered account or any existing covered account. These guidelines
are intended to assist federal credit unions in the formulation and
maintenance of a Program that satisfies the requirements of §
717.90 of this part.
I. The Program
In designing its Program, a federal credit union may
incorporate, as appropriate, its existing policies, procedures, and
other arrangements that control reasonably foreseeable risks to
members or to the safety and soundness of the federal credit union
from identity theft.
II. Identifying Relevant Red Flags
(a) Risk Factors. A federal credit union should consider
the following factors in identifying relevant Red Flags for covered
accounts, as appropriate:
(1) The types of covered accounts it offers or maintains;
(2) The methods it provides to open its covered accounts;
(3) The methods it provides to access its covered accounts;
and
(4) Its previous experiences with identity theft.
(b) Sources of Red Flags. Federal credit unions should
incorporate relevant Red Flags from sources such as:
(1) Incidents of identity theft that the federal credit union
has experienced;
(2) Methods of identity theft that the federal credit union has
identified that reflect changes in identity theft risks; and
(3) Applicable supervisory guidance.
(c) Categories of Red Flags. The Program should include
relevant Red Flags from the following categories, as appropriate.
Examples of Red Flags from each of these categories are appended as
Supplement A to this appendix J.
(1) Alerts, notifications, or other warnings received from
consumer reporting agencies or service providers, such as fraud
detection services;
(2) The presentation of suspicious documents;
(3) The presentation of suspicious personal identifying
information, such as a suspicious address change;
(4) The unusual use of, or other suspicious activity related to,
a covered account; and
(5) Notice from members, victims of identity theft, law
enforcement authorities, or other persons regarding possible
identity theft in connection with covered accounts held by the
federal credit union.
III. Detecting Red Flags
The Program's policies and procedures should address the
detection of Red Flags in connection with the opening of covered
accounts and existing covered accounts, such as by:
(a) Obtaining identifying information about, and verifying the
identity of, a person opening a covered account; for example, using
the policies and procedures regarding identification and
verification set forth in the Customer Identification Program rules
implementing 31 U.S.C. 5318(l) (31 CFR 1020.220); and
(b) Authenticating members, monitoring transactions, and
verifying the validity of change of address requests, in the case
of existing covered accounts.
IV. Preventing and Mitigating Identity Theft
The Program's policies and procedures should provide for
appropriate responses to the Red Flags the federal credit union has
detected that are commensurate with the degree of risk posed. In
determining an appropriate response, a federal credit union should
consider aggravating factors that may heighten the risk of identity
theft, such as a data security incident that results in
unauthorized access to a member's account records held by the
federal credit union or a third party, or notice that a member has
provided information related to a covered account held by the
federal credit union to someone fraudulently claiming to represent
the federal credit union or to a fraudulent website. Appropriate
responses may include the following:
(a) Monitoring a covered account for evidence of identity
theft;
(b) Contacting the member;
(c) Changing any passwords, security codes, or other security
devices that permit access to a covered account;
(d) Reopening a covered account with a new account number;
(e) Not opening a new covered account;
(f) Closing an existing covered account;
(g) Not attempting to collect on a covered account or not
selling a covered account to a debt collector;
(h) Notifying law enforcement; or
(i) Determining that no response is warranted under the
particular circumstances.
V. Updating the Program
Federal credit unions should update the Program (including the
Red Flags determined to be relevant) periodically, to reflect
changes in risks to members or to the safety and soundness of the
federal credit union from identity theft, based on factors such
as:
(a) The experiences of the federal credit union with identity
theft;
(b) Changes in methods of identity theft;
(c) Changes in methods to detect, prevent, and mitigate identity
theft;
(d) Changes in the types of accounts that the federal credit
union offers or maintains; and
(e) Changes in the business arrangements of the federal credit
union, including mergers, acquisitions, alliances, joint ventures,
and service provider arrangements.
VI. Methods for Administering the Program
(a) Oversight of Program. Oversight by the board of
directors, an appropriate committee of the board, or a designated
employee at the level of senior management should include:
(1) Assigning specific responsibility for the Program's
implementation;
(2) Reviewing reports prepared by staff regarding compliance by
the federal credit union with § 717.90 of this part; and
(3) Approving material changes to the Program as necessary to
address changing identity theft risks.
(b) Reports. (1) In general. Staff of the federal
credit union responsible for development, implementation, and
administration of its Program should report to the board of
directors, an appropriate committee of the board, or a designated
employee at the level of senior management, at least annually, on
compliance by the federal credit union with § 717.90 of this
part.
(2) Contents of report. The report should address
material matters related to the Program and evaluate issues such
as: the effectiveness of the policies and procedures of the federal
credit union in addressing the risk of identity theft in connection
with the opening of covered accounts and with respect to existing
covered accounts; service provider arrangements; significant
incidents involving identity theft and management's response; and
recommendations for material changes to the Program.
(c) Oversight of service provider arrangements. Whenever
a federal credit union engages a service provider to perform an
activity in connection with one or more covered accounts the
federal credit union should take steps to ensure that the activity
of the service provider is conducted in accordance with reasonable
policies and procedures designed to detect, prevent, and mitigate
the risk of identity theft. For example, a federal credit union
could require the service provider by contract to have policies and
procedures to detect relevant Red Flags that may arise in the
performance of the service provider's activities, and either report
the Red Flags to the federal credit union, or to take appropriate
steps to prevent or mitigate identity theft.
VII. Other Applicable Legal Requirements
Federal credit unions should be mindful of other related legal
requirements that may be applicable, such as:
(a) Filing a Suspicious Activity Report under 31 U.S.C. 5318(g)
and 12 CFR 748.1(c);
(b) Implementing any requirements under 15 U.S.C. 1681c-1(h)
regarding the circumstances under which credit may be extended when
the federal credit union detects a fraud or active duty alert;
(c) Implementing any requirements for furnishers of information
to consumer reporting agencies under 15 U.S.C. 1681s-2, for
example, to correct or update inaccurate or incomplete information,
and to not report information that the furnisher has reasonable
cause to believe is inaccurate; and
(d) Complying with the prohibitions in 15 U.S.C. 1681m on the
sale, transfer, and placement for collection of certain debts
resulting from identity theft.
Supplement A to Appendix J
In addition to incorporating Red Flags from the sources
recommended in section II.b. of the Guidelines in appendix J of
this part, each federal credit union may consider incorporating
into its Program, whether singly or in combination, Red Flags from
the following illustrative examples in connection with covered
accounts:
Alerts, Notifications or Warnings From a Consumer Reporting Agency
1. A fraud or active duty alert is included with a consumer
report.
2. A consumer reporting agency provides a notice of credit
freeze in response to a request for a consumer report.
3. A consumer reporting agency provides a notice of address
discrepancy, as defined in § 717.82(b) of this part.
4. A consumer report indicates a pattern of activity that is
inconsistent with the history and usual pattern of activity of an
applicant or member, such as:
a. A recent and significant increase in the volume of
inquiries;
b. An unusual number of recently established credit
relationships;
c. A material change in the use of credit, especially with
respect to recently established credit relationships; or
d. An account that was closed for cause or identified for abuse
of account privileges by a financial institution or creditor.
Suspicious Documents
5. Documents provided for identification appear to have been
altered or forged.
6. The photograph or physical description on the identification
is not consistent with the appearance of the applicant or member
presenting the identification.
7. Other information on the identification is not consistent
with information provided by the person opening a new covered
account or member presenting the identification.
8. Other information on the identification is not consistent
with readily accessible information that is on file with the
federal credit union, such as a signature card or a recent
check.
9. An application appears to have been altered or forged, or
gives the appearance of having been destroyed and reassembled.
Suspicious Personal Identifying Information
10. Personal identifying information provided is inconsistent
when compared against external information sources used by the
federal credit union. For example:
a. The address does not match any address in the consumer
report; or
b. The Social Security Number (SSN) has not been issued, or is
listed on the Social Security Administration's Death Master
File.
11. Personal identifying information provided by the member is
not consistent with other personal identifying information provided
by the member. For example, there is a lack of correlation between
the SSN range and date of birth.
12. Personal identifying information provided is associated with
known fraudulent activity as indicated by internal or third-party
sources used by the federal credit union. For example:
a. The address on an application is the same as the address
provided on a fraudulent application; or
b. The phone number on an application is the same as the number
provided on a fraudulent application.
13. Personal identifying information provided is of a type
commonly associated with fraudulent activity as indicated by
internal or third-party sources used by the federal credit union.
For example:
a. The address on an application is fictitious, a mail drop, or
prison; or
b. The phone number is invalid, or is associated with a pager or
answering service.
14. The SSN provided is the same as that submitted by other
persons opening an account or other members.
15. The address or telephone number provided is the same as or
similar to the address or telephone number submitted by an
unusually large number of other persons opening accounts or by
other members.
16. The person opening the covered account or the member fails
to provide all required personal identifying information on an
application or in response to notification that the application is
incomplete.
17. Personal identifying information provided is not consistent
with personal identifying information that is on file with the
federal credit union.
18. For federal credit unions that use challenge questions, the
person opening the covered account or the member cannot provide
authenticating information beyond that which generally would be
available from a wallet or consumer report.
Unusual Use of, or Suspicious Activity Related to, the Covered
Account
19. Shortly following the notice of a change of address for a
covered account, the institution or creditor receives a request for
a new, additional, or replacement card or a cell phone, or for the
addition of authorized users on the account.
20. A new revolving credit account is used in a manner commonly
associated with known patterns of fraud. For example:
a. The majority of available credit is used for cash advances or
merchandise that is easily convertible to cash (e.g., electronics
equipment or jewelry); or
b. The member fails to make the first payment or makes an
initial payment but no subsequent payments.
21. A covered account is used in a manner that is not consistent
with established patterns of activity on the account. There is, for
example:
a. Nonpayment when there is no history of late or missed
payments;
b. A material increase in the use of available credit;
c. A material change in purchasing or spending patterns;
d. A material change in electronic fund transfer patterns in
connection with a deposit account; or
e. A material change in telephone call patterns in connection
with a cellular phone account.
22. A covered account that has been inactive for a reasonably
lengthy period of time is used (taking into consideration the type
of account, the expected pattern of usage and other relevant
factors).
23. Mail sent to the member is returned repeatedly as
undeliverable although transactions continue to be conducted in
connection with the member's covered account.
24. The federal credit union is notified that the member is not
receiving paper account statements.
25. The federal credit union is notified of unauthorized charges
or transactions in connection with a member's covered account.
Notice From Members, Victims of Identity Theft, Law Enforcement
Authorities, or Other Persons Regarding Possible Identity Theft in
Connection With Covered Accounts Held by the Federal Credit Union
26. The federal credit union is notified by a member, a victim
of identity theft, a law enforcement authority, or any other person
that it has opened a fraudulent account for a person engaged in
identity theft.
[72 FR 63769, Nov. 9, 2007, as amended at 74 FR 22644, May 14,
2009; 76 FR 18365, Apr. 4, 2011]