CUNA Regulatory Comment Call


May 4, 2004

FTC Proposal on Definition of ID Theft, ID Theft Report, Appropriate Proof of Identity, and Duration of Active Duty Alerts
(Major Rule – Applies to All Credit Unions)

EXECUTIVE SUMMARY

Please feel free to fax your responses to CUNA at 202-638-7052; e-mail them to Associate General Counsel Mary Dunn at mdunn@cuna.coop and to Assistant General Counsel Jeff Bloch at jbloch@cuna.coop; or mail them to Mary and Jeff in c/o CUNA’s Regulatory Advocacy Department, 601 Pennsylvania Avenue, NW, South Building, Suite 600, Washington, DC 20004-2601. You may also contact us at 800-356-9655, ext. 6732, if you would like a copy of the proposed rule, or you may access it on the Internet at the following address: http://www.ftc.gov/os/2004/04/factafrn0421.pdf.

BACKGROUND

President Bush this past December signed into law the FACT Act that permanently extends the federal preemptions for credit reporting under the FCRA. The new law also creates a number of important new consumer protections designed to help prevent identity theft and assist consumers who become victims of this rapidly growing crime. It also contains new restrictions on information sharing and creates a new federal commission that will coordinate financial education efforts at the national, state, and local levels.

The FACT Act will be implemented through a number of new rules that will be issued this year. Access below for a special issue of RegWatch that describes the significant provisions of the FACT Act: http://www.cuna.org/reg_advocacy/member/regwatch/regwatch.html.

DESCRIPTION OF THE PROPOSED RULE

Definition of “Identity Theft”

The FACT Act gives victims of identity theft certain rights and creates requirements that creditors and others must follow to reduce the occurrence of this crime. The FACT Act defines identity theft as “a fraud committed using the identifying information of another person” and allows the FTC to enhance the definition of this term.

The proposed rule will enhance this definition as follows:

Definition of “Identity Theft Report”

The FACT Act defines “identity theft report” as a report that:

Under the FACT Act, the identity theft report may be used to mitigate identity theft as follows:

A credit bureau may decline or remove the information block if it reasonably determines that there is an error, misrepresentation by the consumer, or if the consumer receives goods, services, or money as a result of the blocked transaction. Information furnishers, such as creditors, may continue to furnish information if it knows or is informed by the consumer that the information is correct.

The proposed rule will add the following to the definition of “identity theft report” that is intended to prevent abuse without creating undue burden for victims:

Duration of the “Active Duty Alert”

Military personnel who are on active duty or assigned to service away from their usual duty station may request an “active duty alert” on their credit reports, which will require creditors using these reports to use reasonable means to determine the identity of the consumer. This alert is not designed to respond to a specific threat of identity theft. It is a preventive measure for service members who are unlikely to be able to apply for credit or monitor their financial accounts while they are away from home.

Under the FACT Act, the duration of the active duty alert is at least 12 months, but the FTC has the authority to extend the time period. The proposed rule will not extend the time period, although active duty personnel may place another 12-month alert after the first alert expires.

Appropriate Proof of Identity

The FACT Act requires the FTC to determine the “appropriate proof of identity “ for the following requests from consumers:

The proposed rule will require credit bureaus to develop reasonable requirements to identify consumers, balancing the risks of misidentification with the harm to consumers if protections under the FACT Act are delayed. These requirements should be sufficient, at a minimum, to match consumers with their credit file. The proposed rule provides the following examples of reasonable information requirements:

QUESTIONS TO CONSIDER REGARDING THE FTC’S PROPOSAL (The FTC has specifically requested comment on the issues raised in these questions.)

Eric Richard • General Counsel • (202) 508-6742 • erichard@cuna.com
Mary Mitchell Dunn • SVP & Associate General Counsel • (202) 508-6736 • mdunn@cuna.com
Jeffrey Bloch • Assistant General Counsel • (202) 508-6732 • jbloch@cuna.com
Catherine Orr • Senior Regulatory Counsel • (202) 508-6743 • corr@cuna.com