As of November 1, 2009, the FTC requires all businesses taking personal identification to have a Red Flags Rule Policy. Property management companies contract with other businesses, so the Red Flags requirement brings up questions with regard to these vendor relationships:
- Are you responsible for the actions of your vendors concerning identify theft?
- If so, how far does that responsibility go?
Most property managers realize they have responsibility for their vendor qualifications and performance. Vendors are an integral part of a property management company’s support system, but they can also cause liability with tenants. They enter the tenants’ residences and therefore, could have access to their private information. Do you take steps to protect your company from a problem with vendors and identity theft?
Vendors normally do not take credit card payments or other identification while at the property, but they do have entry into your tenant’s home. It’s important to stop and think about what you can do to minimize the damage if there is an identity theft complaint because of a vendor.
Here are five precautionary steps you can take:
- Know who you are taking on as a vendor. It’s important to interview them, check their references, obtain a credit report, and run a criminal background check. Hiring a vendor is similar to investigating a prospective tenant. After all, they will enter both vacant and occupied properties.
- Never use a vendor without a written agreement, outlining your expectations of them. You take another step when you provide them with a vendor handbook or manual, enabling you to expand on the contract and your requirements.
- Follow up on the performance of your vendors. Contact tenants to see if all went well during a maintenance appointment or if they encountered any personal difficulties with them.
- Investigate vendor complaints thoroughly, until you are satisfied a complaint is completely resolved without the possibility of future problems.
- Document vendor requirements and procedures in your property management company systems (such as a Vendor Manual, a Property Management Policy and Procedures Manual, and of course, the Red Flag Office Policy Manual).
One well-known NARPM® National Affiliate, Vicky Methven, with Legal Shield, feels vendors can be a high liability with identity theft. Her company provides small businesses with affordable access to professional legal services and identity theft protection and restoration services. Vicky recommends property managers institute the following vendor policies:
- All Vendors should provide a copy of Vendor’s Certificate of Insurance, listing the Property Management Company as “Additional Insured”
- All Vendors should provide a copy of their Red Flags Rule Policy and no vendor will be utilized without a copy of this policy, on file.
What should you do if a vendor objects to all of your requirements? This may just be a big red flag for you! Why do they refuse to comply when it is in their best interest? You cannot always know when someone has ill intent when it comes to identity theft. However, you can take common sense steps to reduce your liability and make it clear to your vendors that this is a serious problem that both of you cannot ignore. You need to put policy & procedures in place to protect your property management company and your vendors.
Jean Storms, MPM® is the founder/author of LandlordSource and has been a NARPM® member since January 1993.
Disclaimer: LandlordSource does not represent the article content in this website as legal advice. It is shared information only and up to the reader to use this information responsibly, seeking legal advice as necessary to their business.