FTC Rule Requires Reasonable Measures to Dispose of Consumer Information on Employees

Saturday, October 1, 2005
by Jackson Lewis

New Federal Trade Commission Regulations prompted by the Fair and Accurate Credit Transactions Act of 2003 (FACT Act) require employers obtaining consumer reports to take reasonable measures to protect against unauthorized access to or use of the information in connection with its disposal. Such consumer information includes any reported information provided to an employer by a third party consumer reporting agency, which conducts a background check for purposes related to current, former and prospective employees, and any compilation of such information. The regulations are effective as of June 1, 2005.

The intent of this new regulation is to protect an employer's prospective and former employees from the potential for identity theft resulting from consumer report information the employer may have obtained and stored.

The FTC offers the following suggestions:
  • Adopt policies requiring the burning, pulverizing, or shredding of consumer information so that information cannot be read or reconstructed, and monitor compliance with such policies;

  • Adopt and monitor compliance with a similar policy addressing the destruction or erasure of electronic media containing consumer information;

  • Conduct due diligence and select a qualified vendor engaged in the business of properly disposing of consumer information.

This rule applies to the physical discard of consumer information as well as data stored on a computer that is to be donated or transferred to another party. Under the Fair Credit Reporting Act, aggrieved parties have remedies for rights violations, including damages and attorneys fees. The text of the regulations is published in the Federal Register, 16 C.F.R. Part 682.

Given the growing sensitivity to employee privacy issues, all employers should review their record retention and destruction practices and create a best practice for retaining as well as disposing of unnecessary personnel-related documentation.
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