MEMORANDUM

DATE: October 13, 2008

TO: Cooperative Managers

FROM: Bill Oemichen         
President & CEO

RE: Red Flags Rule and Model Policy for Cooperative Network members

As a service to Cooperative Network members and to assist in meeting the new regulatory requirements described below, Cooperative Network has developed a model Identity Theft Prevention Policy for use by member cooperatives.  This model policy can be made specific to each cooperative and will assist in meeting the requirements of the new rule.

Identity theft is a growing concern in the United States.  Identity theft is the number one fraud complaint and last year nearly 10 million people were victims.  In response to congressional concerns about the risk of identity theft, the U.S. Federal Trade Commission (FTC) created a new identity theft prevention requirement that applies to many cooperatives.

The FTC has implemented the federal Fair and Accurate Transactions Act of 2003 with a new rule that goes into effect on November 1, 2008.  The new rule requires cooperatives that use credit reports, provide credit to members/customers, or report information to a credit agency to identify and respond to indicators of possible identity theft, known as red flags.

This rule, called the “Red Flags Rule” requires covered cooperatives to develop a written policy that: (1) identifies relevant identity theft red flags for covered accounts, (2) detects any identity theft red flags, (3) responds appropriately to any red flags and prevents and mitigates identity theft, and (4) ensures that the identity theft program is updated regularly.

The cooperatives program must be approved by the board of directors or a board committee, and the board or senior management must be involved in the oversight, development, implementation, and administration of the program.  Staff training is also required to effectively implement the cooperative’s program.

We are happy to assist and answer any questions about the Red Flags Rule and how it may impact your cooperative.  Please feel free to contact Amy Fredregill or me at if you have any questions.