APPENDIX J—Interagency Guidelines on Identity Theft Detection, Prevention, and Mitigation

Section 222.90 of this part requires each financial institution and creditor that offers or maintains one or more covered accounts, as defined in section 222.90(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 financial institutions and creditors in the formulation and maintenance of a program that satisfies the requirements of section 222.90 of this part.

In designing its program, a financial institution or creditor may incorporate, as appropriate, its existing policies, procedures, and other arrangements that control reasonably foreseeable risks to customers or to the safety and soundness of the financial institution or creditor from identity theft.

(a) Risk factors. A financial institution or creditor should consider the following factors in identifying relevant red flags for covered accounts, as appropriate:

(b) Sources of red flags. Financial institutions and creditors should incorporate relevant red flags from sources such as—

(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.

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 USC 5318(l) (31 CFR 103.121); and

(b) authenticating customers, monitoring transactions, and verifying the validity of change of address requests, in the case of existing covered accounts.

The program’s policies and procedures should provide for appropriate responses to the red flags the financial institution or creditor has detected that are commensurate with the degree of risk posed. In determining an appropriate response, a financial institution or creditor 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 customer’s account records held by the financial institution, creditor, or third party, or notice that a customer has provided information related to a covered account held by the financial institution or creditor to someone fraudulently claiming to represent the financial institution or creditor or to a fraudulent website. Appropriate responses may include the following:

(a) monitoring a covered account for evidence of identity theft;

(b) contacting the customer;

(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.

Financial institutions and creditors should update the program (including the red flags determined to be relevant) periodically, to reflect changes in risks to customers or to the safety and soundness of the financial institution or creditor from identity theft, based on factors such as—

(a) the experiences of the financial institution or creditor 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 financial institution or creditor offers or maintains; and

(e) changes in the business arrangements of the financial institution or creditor, including mergers, acquisitions, alliances, joint ventures, and service-provider arrangements.

(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—

(b) Reports.

(c) Oversight of service-provider arrangements. Whenever a financial institution or creditor engages a service provider to perform an activity in connection with one or more covered accounts the financial institution or creditor 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 financial institution or creditor 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 financial institution or creditor, or to take appropriate steps to prevent or mitigate identity theft.

Financial institutions and creditors should be mindful of other related legal requirements that may be applicable, such as—

(a) for financial institutions and creditors that are subject to 31 U.S.C. 5318(g), filing a suspicious-activity report in accordance with applicable law and regulation;

(b) implementing any requirements under 15 U.S.C. 1681c-1(h) regarding the circumstances under which credit may be extended when the financial institution or creditor 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.

In addition to incorporating red flags from the sources recommended in section II.b. of the guidelines in appendix J of this part, each financial institution or creditor may consider incorporating into its program, whether singly or in combination, red flags from the following illustrative examples in connection with covered accounts:

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 12 CFR 1022.82(b).

4. A consumer report indicates a pattern of activity that is inconsistent with the history and usual pattern of activity of an applicant or customer, such as—

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 customer presenting the identification.

7. Other information on the identification is not consistent with information provided by the person opening a new covered account or customer presenting the identification.

8. Other information on the identification is not consistent with readily accessible information that is on file with the financial institution or creditor, 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.

10. Personal identifying information provided is inconsistent when compared against external information sources used by the financial institution or creditor. For example—

11. Personal identifying information provided by the customer is not consistent with other personal identifying information provided by the customer. 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 financial institution or creditor. For example—

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 financial institution or creditor. For example—

14. The SSN provided is the same as that submitted by other persons opening an account or other customers.

15. The address or telephone number provided is the same as or similar to the account number or telephone number submitted by an unusually large number of other persons opening accounts or other customers.

16. The person opening the covered account or the customer 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 financial institution or creditor.

18. For financial institutions and creditors that use challenge questions, the person opening the covered account or the customer cannot provide authenticating information beyond that which generally would be available from a wallet or consumer report.

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 patterns. For example—

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—

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 customer is returned repeatedly as undeliverable although transactions continue to be conducted in connection with the customer’s covered account.

24. The financial institution or creditor is notified that the customer is not receiving paper account statements.

25. The financial institution or creditor is notified of unauthorized charges or transactions in connection with a customer’s covered account.

26. The financial institution or creditor is notified by a customer, 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.