What Everyone Should Know About FACTA

The advent of the digital age has brought with it perils as well as possibilities. For every Internet millionaire, there’s someone who fell victim to online identity theft. As technology increases, so does the possibility of losing one’s livelihood to an online thief. But not every chance for identity theft stems from information stored in a hard drive; often, a criminal’s best chance at stealing your vital information simply involves getting his hands on the right piece of paper.

Enter the Fair and Accurate Credit Transactions Act of 2003, a federal law passed as an amendment to the Fair Credit Reporting act, passed years earlier. Through FACTA, consumers may request a free credit report once a year from one of the three major consumer credit reporting agencies. But FACTA also guards against identity theft by demanding the proper disposal of sensitive information, by means of deletion, document destruction and shredding.

“Dumpster Diving” and Document Destruction

Before laws such as FACTA, the Health Insurance Portability and Accountability Act, and the Gramm-Leach Bliley Financial Modernization Act, it was easy for identity thieves to obtain whatever they needed to duplicate your existence – social security numbers, bank account information, credit reports – simply by sifting through the right trash cans. Privacy rights organizations have cited improper disposal of documents as one of the leading factors in the rise of identity theft. Fortunately, FACTA contains a clause that specifically guards against such practices, making proper document destruction the responsibility of almost any organization bearing financial information.

The “Disposal Rule,” as it’s called, dictates that a wide range of both large and small organizations using consumer credit reports engage in proper document destruction practices. The Disposal Rule affects credit reporting companies and debt collectors, lenders, insurers, landlords, mortgage brokers and automobile dealers, attorneys, private investigators, and a wide range of entities who maintain consumer information.

As for the actual destruction, the Disposal Rule maintains that any business affected by FACTA must perform a due-diligence search for a document destruction contractor to dispose of the relevant materials. Such due diligence could include reviewing an independent audit of a document shredding firm’s FACTA compliance; obtaining information about a document destruction company from independent sources; requiring that the shredding company be certified by a recognized trade association; or evaluating the shredding company’s information security policies and procedures.

A quality document destruction firm will simplify these tasks for its clients, making phone numbers and contact information available for outside references (such as insurance company representatives). Financial record shredding is a delicate business, and small and large businesses alike should take care to ensure that their document destruction firm is FACTA-compliant.

Fortunately, the rules outlined in FACTA have quite a bit in common with those outlined in HIPAA, which governs medical record shredding, and the Gramm-Leach Bliley Financial Modernization Act, which primarily affects attorneys and accountants. Such a broad spectrum of common regulations means that quality document shredding firms will be quick to adopt safe practices.