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The voice of the broker nation is heard in D.C.: A recap of the NAMB 2005 Legislative and Regulatory Conference

National Mortgage Professional
Jun 23, 2005

FACTA to affect disposal of consumer credit informationStacey DiPiazza FACTA, consumer fraud, identity theft, compliance By Wednesday, June 1, every company that deals with consumer credit information will have to change the way it does business. This is the day that the Fair and Accurate Credit Transaction Act (FACTA) goes into effect. The new federal law was designed to reduce the risk of consumer fraud and identity theft that is created by the improper disposal of consumer information. Its impact will be felt by any business that has access to consumers' credit information. The rule requires that these companies destroy all consumer information before it is discarded. Businesses that fail to properly destroy this information will face severe penalties, which could include civil liabilities, the threat of class action suits, and state and federal enforcement actions. Although all businesses will feel the impact of the new rule, it especially singles out consumer reporting agencies, lenders, insurers, employers, landlords, government agencies, mortgage brokers, auto dealers and other users of consumer reports. FACTA applies to anybody who maintains consumer information and any business that is regulated by the Federal Trade Commission. It is important to remember that FACTA covers more than paper. The rule covers any medium that contains personal information, whether it is paper, compact discs or even hard drives. For example, Infoshred LLC, a document destruction company in South Windsor, Conn., has been asked by many companies to destroy hard drives, even though the companies have already removed the information from the drives. They want to be absolutely sure that no information can be retrieved from these hard drives, so Infoshred physically destroys and disposes of them. What does FACTA mean to your business? FACTA mandates that you must monitor and implement policies and procedures for the destruction of information. For example, in the past, a business may have thrown old credit reports into the trash or recycling bin. Now, this information must be destroyed. Throwing it away or placing it in a recycling bin will not satisfy the new FACTA rules. The information must be disposed of in a confidential waste program where it is securely destroyed. In the past, such businesses would recycle office paper, but that won't satisfy the new requirements. Most companies recycle their paper through an outside vendor that picks up the paper and transports it to their facility in an unsecured vehicle. Employees who handle it usually aren't background-checked and they often bring the paper to an unsecured recycling facility, where it is dumped on the floor and pushed with pay-loaders into a baler that compacts the paper into bales. The bales are then picked up by mills and recycled. The problem is that throughout the process, the paper is intact. It can be read by anyone who finds it. Shredding sensitive documents will satisfy FACTA's requirements. When you use a professional shredding service, discarded paper goes into what is called a 'closed system' that safeguards the documents from the time they are discarded to the time they are destroyed and disposed of. Security is the key to making sure your business satisfies FACTA. Professional shredding services supply their clients with locked containers, and the employees who handle the containers are background-checked for security purposes. Such companies often offer the option of either shredding the documents onsite or transporting them in an alarmed, locked truck to their facility for destruction. Some document destruction companies such as Infoshred even track their trucks by satellite along their route to the secured facility as an extra precaution. When the documents reach the facility, they are shredded within 24 hours. Once the material is shredded, it is baled, re-pulped and reprocessed into recycled goods. Some businesses facing the new FACTA requirements may consider buying their own shredders. This is a decision that should be weighed carefully. Do you really want your employees to take the time to shred every document as well as maintain the shredders? Infoshred has been called in by panicky customers who face a deadline and are overwhelmed by the amount of material they are trying to feed into a small office shredder. Also, keep in mind that if you fill up your dumpsters with fluffy shredded paper, chances are your disposal costs will increase. What should businesses affected by FACTA do before the June 1 deadline? •Establish internal policies and procedures for handling confidential information. These guidelines should include defining confidential information, explaining how it will be handled and setting deadlines for destruction. The idea is to clearly establish how sensitive information will be handled and to develop a logistical flow for the paper that contains it. •Decide how you are going to handle material other than paper. Many times, people forget that things like compact discs, diskettes and even hard drives contain personal data that must be destroyed under the new laws. So, when you are upgrading your computers, you must decide what you are going to do with the old ones to safeguard the consumer information they contain. •Utilize a qualified destruction vendor. If youve never worked with this kind of outside resource, there are a few things to keep in mind. It is important to look at a firm's security, policies and procedures, insurance coverage, references and certifications. Make sure that the vendor is certified by the National Association for Information Destruction, which dictates the standards of the industry. Also, look into their methods of employee screening and security. Both the trucks and the company facilities need to be secure. Trucks should be tracked from your business to the processing facility, and the facility should be monitored 24 hours a day. You should also feel welcome to visit the facility at any time and the company should be more than agreeable if you want to witness the destruction of your material. Lastly, I urge you to pick a company that is experienced in document destruction, not just waste management. There is a difference. There is no doubt that companies will need to adopt new ways of doing business to meet the requirements of FACTA. Both businesses and their employees must change the way they handle consumer credit information. Most companies will need to re-examine how they do business to protect that information. FACTA will take effect on Wednesday, June 1, and companies will only have the next few months to bring their operations into compliance. Stacey DiPiazza is the owner of Infoshred LLC, a document destruction and record storage company based in South Windsor, Conn. For more information, call (888) 800-1552 or visit
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