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HomeMy Public PortalAboutOrdinance No. 1129-08 10-28-2008 ORDINANCE NO. 1129-08 AN ORDINANCE BY THE CITY OF RICHLAND HILLS, TEXAS, PROVIDING A NEW ARTICLE, ARTICLE 9 ESTABLISHING AN IDENTITY THEFT PREVENTION PROGRAM, TO SET OUT DEFINITIONS, POLICIES AND PROCEDURES FOR IMPLEMENTATION OF THE IDENTITY THEFT PREVENTION PROGRAM; TO PROVIDE A REPEALING CLAUSE, TO PROVIDE A SAVINGS AND SEVERABILITY CLAUSE AND PROVIDING FOR AN EFFECTIVE DATE. WHEREAS, Federal Trade Commission adopted rules pertaining to an Identity Theft Prevention pursuant to the Red Flags Rule which implements Section 114 of the Fair and Accurate Credit Transactions Act of 2003 which requires that creditors adopt an Identity Theft Prevention Program on or before November 1, 2008; and WHEREAS, the Red Flags Rule defines creditor to include all utility companies and the City owns and provides utility services and/or accepts payments for municipal utility services and is therefore classified as a creditor; and WHEREAS, the City Council has requested that City personnel, including the City Attorney, the City Manager/Administrator and the Utility Director, to develop such Identity Theft Prevention Program and such personnel recommend the Identity Theft Prevention Program attached hereto and incorporated herein as Exhibit "A" ("Program"); and WHEREAS, the City Council has reviewed the Program and believes it fulfills, complies and implements the Red Flags Rule and other requirements outlined by the Federal Trade Commission; and WHEREAS, the City Council finds that it is in the public interest to approve the Program. NOW, THEREFORE, BE IT ORDAINED BY THE CITY COUNCIL OF THE CITY OF RICHLAND HILLS, TEXAS, THAT: Section 1. Findings. The foregoing recitals are hereby found to be true and correct and are hereby adopted by the City Council and made a part hereof for all purposes as findings of fact. Section 2. Amendment. The Code of Ordinances are hereby amended, by adding a new Article 9 ,entitled Identity Theft Prevention Program, as is more particularly set out in Exhibit A. Section 3. Implementation. All procedures and requirements of The Identity Theft Prevention Program shall be implemented as outlined in the Exhibit A. Section 4. All provisions of the Code of Ordinances of the City of Richland Hills in conflict with the provisions of this Ordinance are hereby repealed to the extent of such conflict, and all other provisions of the Ordinances of the City of Richland Hills not in conflict with the provisions of this Ordinance shall remain in full force and effect. Section 5. Should any sentence, paragraph, subdivision, clause, phrase or section of this Ordinance be adjudged or held to be unconstitutional, illegal or invalid, the same shall not affect the validity of this Ordinance as a whole, or any part or provision thereof other than the part so decided to be invalid, illegal or unconstitutional, and shall not affect the validity of the Code of Ordinances as a whole. Section 6. This Ordinance shall take effect immediately from and after its passage and the publication of the caption, as the law and charter in such cases provide. Section 7. Open Meetings. That it is hereby officially found and determined that the meeting at which this ordinance is passed was open to the public as required and that public notice of the time, place, and purpose of said meeting was given as required by the Open Meeting Act, Capt. 551, Loc. Gov't. Code. PASSED AND APPROVED on this 28th day of October, 2008. CI Richland Hills, T S ac.C~" Ci'~'' ayor ATTEST: n i z+n ~~r~~~ ~eGH Lt°N~y,/~ . cA City Secretary - ~ APPROVE A TO FORM: City ttorney c~r~• ~ ~ ,~.C~ vv ~ SAND CITY OF RICHLAND HILLS Identity Theft Prevention Program Effective beginning November 1, 2008 I. PROGRAM ADOPTION The City of Richland hills ("City") developed this Identity Theft Prevention Program ("Program") pursuant to the Federal Trade Commission's Red Flags Rule ("Rule"), which implements Section 114 of the Fair and Accurate Credit Transactions Act of 2003. 16 C. F. R. § 681.2. This Program was developed for the Utility Department of the City ("Utility") with oversight and approval of the City Council. After consideration of the size and complexity of the Utility's operations and account systems, and the nature and scope of the Utility's activities, the City Council determined that this Program was appropriate for the City's Utility, and therefore approved this Program on , 2008. II. PURPOSE AND DEFINITIONS A. Establish an Identity Theft Prevention Program To establish an Identity Theft Prevention Program designed to detect, prevent and mitigate identity theft in connection with the opening of a covered account or an existing covered account and to provide for continued administration of the Program in compliance with Part 681 of Title 16 of the Code of Federal Regulations implementing Sections 114 and 315 of the Fair and Accurate Credit Transactions Act (FACTA) of 2003. B. Establishing and Fulfilling Requirements of the Red Flags Rule The Red Flags Rule ("Rule") defines "Identity Theft" as "fraud committed using the identifying information of another person" and a "Red Flag" ("Red Flag") as a pattern, practice, or specific activity that indicates the possible existence of Identity Theft. Under the Rule, every financial institution and creditor is required to establish an "Identity Theft Prevention Program" tailored to its size, complexity and the nature of its operation. The Program must contain reasonable policies and procedures to: 1. Identify relevant Red Flags for new and existing covered accounts and incorporate those Red Flags into the Program; 2. Detect Red Flags that have been incorporated into the Program; 3. Respond appropriately to any Red Flags that are detected to prevent and mitigate Identity Theft; and 4. Ensure the Program is updated periodically, to reflect changes in risks to customers or to the safety and soundness of the creditor from Identity Theft. C. Red Flags Rule definitions used in this Program City: The City of Richland Hills, Texas. Covered Account: Under the Rule, a "covered account" is: 1. Any account the Utility offers or maintains primarily for personal, family or household purposes, that involves multiple payments or transactions; and 2. Any other account the Utility offers or maintains for which there is a reasonably foreseeable risk to customers or to the safety and soundness of the Utility from Identity Theft. Creditors: The Rule defines creditors "to include finance companies, automobile dealers, mortgage brokers, utility companies, and telecommunications companies. Where non-profit and government entities defer payment for goods or services, they, too, are to be considered creditors." Identifying Information is defined under the Rule as "any name or number that may be used, alone or in conjunction with any other information, to identify a specific person," including: name, address, telephone number, social security number, date of birth, government issued driver's license or identification number, alien registration number, government passport number, employer or taxpayer identification number, unique electronic identification number, computer's Internet Protocol address, or routing code. Program: The Identity Theft Prevention Program for the City. Program Administrator: The Finance/Accounting Manager is the Program Administrator for the Program. Utility: The Utility is the Utility Department for the City. III. IDENTIFICATION OF RED FLAGS. In order to identify relevant Red Flags, the Utility considers the types of accounts that it offers and maintains, the methods it provides to open its accounts, the methods it provides to access its accounts, and its previous experiences with Identity Theft. The Utility identifies the following red flags, in each of the listed categories: A. Notifications and Warnings From Consumer Credit Reporting Agencies Red Flags 1) Report of fraud accompanying a consumer credit report; 2) Notice or report from a consumer credit agency of a credit freeze on a customer or applicant; 3) Notice or report from a consumer credit agency of an active duty alert for an applicant; and 4) Indication from a consumer credit report of activity that is inconsistent with a customer's usual pattern or activity, including but not limited to: o Recent and significant increase in volume of inquiries o Unusual number of recent credit applications o A material change in use of credit o Accounts closed for cause or abuse B. Suspicious Documents Red Flags 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 Red Flays 1. Identifying information presented that is inconsistent with other information the customer provides (example: inconsistent birth dates, lack of correlation between Social Security number range and date of birth); 2. Identifying information presented that is inconsistent with other sources of information (for instance, Social Security number or 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 fails to provide complete personal identifying information on an application when reminded to do so (however, by law social security numbers must not be required) or an applicant cannot provide information requested beyond what could commonly be found in a purse or wallet; 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 Account Red Flags 1. Change of address for an account followed by a request to change the account holder's name; 2. Payments stop on an otherwise consistently up-to-date account; 3. Account used in a way that is not consistent with prior use (example: very high activity); 4. Mail sent to the account holder is repeatedly returned as undeliverable; 5. Notice to the Utility that a customer is not receiving mail sent by the Utility; 6. Notice to the Utility that an account has unauthorized activity; 7. Breach in the Utility's computer system security; and 8. Unauthorized access to or use of customer account information. E. Alerts from Others Red Flag 1. Notice to the Utility from a customer, identity theft victim, fraud detection service, law enforcement or other person that it has opened or is maintaining a fraudulent account for a person engaged in Identity Theft. IV. DETECTING RED FLAGS. A. New Accounts In order to detect any of the Red Flags identified above associated with the opening of a new account, Utility personnel will take the following steps to obtain and verify the identity of the person opening the account: Detect 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; 4. Request additional documentation to establish identity; and 5. Independently contact the customer or business. B. Existing Accounts In order to detect any of the Red Flags identified above for an existing account, Utility personnel will take the following steps to monitor transactions with an account: Detect 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 close accounts or change billing addresses; and 3. Verify changes in banking information given for billing and payment purposes. V. PREVENTING AND MITIGATING IDENTITY THEFT In the event Utility 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: Prevent and Mitigate 1. Continue to monitor an account for evidence of Identity Theft; 2. Contact the customer, sometimes through multiple methods; 3. Change any passwords or other security devices that permit access to accounts; 4. Not open a new account; 5. Close an existing account; 6. Do not close the account, but monitor or contact authorities; 7. Reopen an account with a new number; 8. Notify the Program Administrator for determination of the appropriate step(s) to take; 9. Notify law enforcement; or 10. Determine that no response is warranted under the particular circumstances. Protect customer identifying information In order to further prevent the likelihood of identity theft occurring with respect to Utility accounts, the Utility 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; 2. Where and when allowed, 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. Change passwords on office computers on a regular basis; 5. Ensure all computers are backed up properly and any backup information is secured; 6. Keep offices clear of papers containing customer information; 7. Request only the last 4 digits of social security numbers (if any); 8. Ensure computer virus protection is up to date; and 9. Require and keep only the kinds of customer information that are necessary for utility purposes. VI. PROGRAM UPDATES This Program will be periodically reviewed and updated to reflect changes in risks to customers and the `soundness of the Utility from Identity Theft. At least annually, the Program Administrator will consider the Utility's experiences with Identity Theft situation, changes in Identity Theft methods, changes in Identity Theft detection and prevention methods, changes in types of accounts the Utility maintains and changes in the Utility's business arrangements with other entities, consult with law enforcement authorities, and consult with other City personnel. After considering these factors, the Program Administrator will determine whether changes to the Program, including the listing of Red Flags, are warranted. If warranted, the Program Administrator will update the Program or present the City Council with his or her recommended changes and the City Council will make a determination of whether to accept, modify or reject those changes to the Program. VII. PROGRAM ADMINISTRATION. A. Oversight Responsibility for developing, implementing and updating this Program lies with an Identity Theft Committee for the Utility. The Committee is headed by a Program Administrator who may be the head of the Utility or his or her appointee. Two or more other individuals appointed by the head of the Utility or the Program Administrator comprise the remainder of the committee membership. The Program Administrator will be responsible for the Program administration, for ensuring appropriate training of Utility staff on the Program, 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 Program. B. Staff Training and Reports Initially, all Utility staff shall be trained either by or under the direction of the Program Administrator in the detection of Red Flags, and the responsive steps to be taken when a Red Flag is detected. Thereafter, all Utility staff shall undergo update training not less than annually. Additionally, all new Utility employees shall undergo training. All Utility staff shall submit reports monthly concerning the Utility's compliance with the program, the training that has been given and the effectiveness of the policies and procedures in addressing the risk of Identity Theft, including recommendations for changes to the Program. While incidents of Identity Theft are to be reported immediately to the Program Administrator, the monthly reports shall contain a recap of the incident and include the steps taken to assist with resolution of the incident. C. Service Provider Arrangements In the event the Utility engages a service provider to perform an activity in connection with one or more accounts, including but not limited to franchise utility providers, the Utility will take the following steps to ensure the service provider performs its activity in accordance with reasonable policies and procedures designed to detect, prevent, and mitigate the risk of Identity Theft. 1. Require, by contract or contract amendment, that service providers have such policies and procedures in place; and 2. Require, by contract or contract amendment, that service providers review the Utility's Program and report any Red Flags to the Program Administrator. D. Specific Program Elements and Confidentiality For the effectiveness of Identity Theft prevention Programs, the Red Flag Rule envisions a degree of confidentiality regarding the Utility's specific practices relating to Identity Theft detection, prevention and mitigation. Therefore, under this Program, knowledge of such specific practices are to be limited to the Identity Theft Committee and those employees who need to know them for purposes of preventing Identity Theft. Because this Program is to be adopted by a public body and thus publicly available, it would be counterproductive to list these specific practices here. Therefore, only the Program's general red flag detection, implementation and prevention practices are listed in this document. New `Red Flag' Requirements for Financial Institutions and Creditors Will Help Fight ld... Yage ~ of ~ Federal Trade Commission ' Protecting America's Consumers FTC Business Alert Email PDF Format New `Red Flag' Requirements for Financial Institutions and Creditors Will Help Fight Identity Theft Identity thieves use people's personally identifying information to open new accounts and misuse existing accounts, creating havoc for consumers and businesses. Financial institutions and creditors soon will be required to implement a program to detect, prevent, and mitigate instances of identity theft. The Federal Trade Commission (FTC), the federal bank regulatory agencies, and the National Credit Union Administration (NCUA) have issued regulations (the Red Flags Rules) requiring financial institutions and creditors to develop and implement written identity theft prevention programs, as part of the Fair and Accurate Credit Transactions (FACT) Act of 2003. The programs must be in place by November 1, 2008, and must provide for the identification, detection, and response to patterns, practices, or specific activities -known as "red flags" -that could indicate identity theft. Who must comply with the Red Flags Rules? The Red Flags Rules apply to "financial institutions" and "creditors" with "covered accounts." Under the Rules, a financial institution is defined as a state or national bank, a state or federal savings and loan association, a mutual savings bank, a state or federal credit union, or any other entity that holds a "transaction account" belonging to a consumer. Most of these institutions are regulated by the Federal bank regulatory agencies and the NCUA. Financial institutions under the FTC's jurisdiction include state-chartered credit unions and certain other entities that hold consumer transaction accounts. A transaction account is a deposit or other account from which the owner makes payments or transfers. Transaction accounts include checking accounts, negotiable order of withdrawal accounts, savings deposits subject to automatic transfers, and share draft accounts. A creditor is any entity that regularly extends, renews, or continues credit; any entity that regularly arranges for the extension, renewal, or continuation of credit; or any assignee of an original creditor who is involved in the decision to extend, renew, or continue credit. Accepting credit cards as a form of payment does not in and of itself make an entity a creditor. Creditors include finance companies, automobile dealers, mortgage brokers, utility companies, and telecommunications companies. Where non-profit and government entities defer payment for goods or services, they, too, are to be considered creditors. Most creditors, except for those regulated by the Federal bank regulatory agencies and the NCUA, come under the jurisdiction of the FTC. A covered account is an account used mostly for personal, family, or household purposes, and that involves multiple payments or transactions. Covered accounts include credit card accounts, mortgage loans, automobile loans, margin accounts, cell phone accounts, utility accounts, checking accounts, and savings accounts. A covered account is also an account for which there is a foreseeable risk of identity theft -for example, small business or sole proprietorship accounts. Complying with the Red Flags Rules Under the Red Flags Rules, financial institutions and creditors must develop a written program that identifies and detects the relevant warning signs - or "red flags" - of identity theft. These may include, for example, unusual account activity, fraud alerts on a consumer report, or attempted use of suspicious account application documents. The program must also describe appropriate responses that would prevent and mitigate the crime and detail a plan to update the program. The program must be managed by the Board of Directors or senior employees of the financial institution or creditor, include appropriate staff training, and provide for oversight of any service providers. How flexible are the Red Flags Rules? ~,..,n.,.~io,a„~,,,,~,~~~,,,~;,,P~~iaiP~r~ialrn5n ~hr,,, 10!21/2008 New `Red Flag' Requirements for Financial Institutions and Creditors Will Help right ld... rage t, or ~ The Red Flags Rules provide all financial institutions and creditors the opportunity to design and implement a program that is appropriate to their size and complexity, as well as the nature of their operations. Guidelines issued by the FTC, the federal banking agencies, and the NCUA (ftc.gov/opa12007110/redflag.shtm) should be helpful in assisting covered entities in designing their programs. A supplement to the Guidelines identifies 26 possible red flags. These red flags are not a checklist, but rather, are examples that financial institutions and creditors may want to use as a starting point. They fall into five categories: • alerts, notifications, or warnings from a consumer reporting agency; • suspicious documents; • suspicious personally identifying information, such as a suspicious address; • unusual use of - or suspicious activity relating to - a covered account; and • notices from customers, victims of identity theft, law enforcement authorities, or other businesses about possible identity theft in connection with covered accounts. More detailed compliance guidance on the Red Flags Rules will be forthcoming. For questions about compliance with the Rules, you may contact RedFlags@ftc.gov. For More Information The FTC works for the consumer to prevent fraudulent, deceptive, and unfair practices in the marketplace and to provide information to businesses to help them comply with the law. To file a complaint or to get free information on consumer issues, visit ftc.gov or call toll-free, 1-877-FTC-HELP (1-877-382-4357); TTY: 1-866-653-4261. The FTC enters Internet, telemarketing, identity theft, and other fraud-related complaints into Consumer Sentinel, a secure online database available to hundreds of civil and criminal law enforcement agencies in the U.S. and abroad. Your Opportunity to Comment The National Small Business Ombudsman and 10 Regional Fairness Boards collect comments from small businesses about federal compliance and enforcement activities. Each year, the Ombudsman evaluates the conduct of these activities and rates each agency's responsiveness to small businesses. Small businesses can comment to the Ombudsman without fear of reprisal. To comment, call toll-free 1-888-REGFAIR (1-888-734-3247) or go to wvvw.sba.gov/ombudsman. June 2008 Last Modified: Wednesday, 11-Jun-2008 09:23:00 EDT r. n._._/_~__/____L,./L..,.:«..~.n/n~orho/nltn~nct~tm 10/21/2008 _ FTC IDENTITY THEFT RULES EFFECTIVE NOVEMBER 1, 2008 rage i of t _ ~ i Welcome to TML Online, the official Web site of the Texas Municipal League. TML Online is designed to provide TML members with another option to keep informed about league programs and services, and stay abreast of the latest news impacting Texas cities. Watch " + our informational video. t~r«e i„:s:a~t wtd;o Fuir;n. tkvr. ~ FTC IDENTITY THEFT RULES EFFECTIVE NOVEMBER 1, 2008 Affiliates Business Service Partners The Federal Trade Commission (FTC) recently adopted rules relating to identity theft Classifieds "red flags" (i.e., warning signs), pursuant to the Fair and Accurate Credit Transactions Conferences/ Education (FACT) Act of 2003. (Please see' FTC Requires Businesses to Adopt Identity Theft Info/Pubs Programs" in the August 21, 2008, edition of the TML Legislative Update.) Legal Legislative Links Municipal utilities must, by November 1, 2008, adopt and implement a written Membership program that: (1) identifies relevant identity theft "red flags" to the utility or other Private Sector covered entity; (2) provides for detection of those red flags; (3) provides for Small Cities appropriate responses to any red flags that are detected; and (4) ensures that the Special TML program is updated periodically to address changing risks. Programs The Minnesota Municipal Utilities Association (MMUA) has prepared a policy template and related documents that are available to anyone. The TML staff has reviewed the documents, and they appear to be an excellent starting place for the development of a policy. The documents are available on MMUA's Web site at www.mmua.org. The MMUA documents, along with a policy prepared by the Georgia Municipal Association, served as models for Texas-based FACT Act documents that are now available on TML's Web site at http://www.tml.org/legal-topics/legal_utilities.html. More information on the rules and identity theft programs can be found at http;//www.ftc.gov/bcp/edu/pubs/business/alerts/aIt050.shtm. Any questions can be directed to legal@tml.org or to the FTC at RedFlags@ftc.gov. TML member cities may use the material herein for any purpose. No other person or entity may reproduce, duplicate, or distribute any part of this document without the written authorization of the Texas Municipal League. Back to Legislative Update Index Cr72008 Texas Municipal League, 1821 Rutherford Lane, Suile 400, Austin, Texas 78754-5128; 512-231- 7400 t,,+~.il.,,,,,.,,+..,~ ~rRitoR „r~~oracnan;c 11r,~atPl(1(14nRP rhPfthrm) 10/21/2008