New “Red Flag” Requirements for Municipalities MAY 1, 2009

(Model Policy and Resolution is available on the League Website www.wvml.org members section)
 
In order to combat the growing problem of identity theft, the Federal Trade Commission (FTC) has issued new “Red Flag” rules which apply to all municipalities that have utility accounts, such as water, sewer or electricity, and other operations that defer payment for services on a recurring basis. In accordance a decision by the FTC to delay enforcement of these new rules for six months, the rules now require that by May 1, 2009 such municipalities have in place written programs to identify, detect and respond to patterns, practices or specific activities - known as “Red Flags” - that could indicate identity theft.
 
The rules can be found at http://www.ftc.gov/os/fedreg/2007/november/071109redflags.pdf.  Information on the enforcement delay can be found at http://ftc.gov/opa/2008/10/redflags.shtm.
 
In particular, the new rules apply to all municipal utility and other services operations that provide a service for which payment is deferred until a future date. For example, when water, sewer or electricity is provided by a city and then paid for by the consumer at the end of a billing cycle, the city has extended credit for the purpose of the FTC rules. The definition of a “creditor” in the rules includes “utility companies” and a “covered account” (those accounts to which the rules apply) is defined to include an account that a creditor “offers or maintains, primarily for personal, family or household purposes, that involves or is designed to permit multiple payments or transactions, such as a … utility account.”