Fair Credit Reporting Act Records and Requirements
The Fair Credit Reporting Act, (FCRA) signed into law in 1970, created a platform for fair and accurate reporting of credit-related consumer information. Other sections of the original act, its additions and amendments concentrate on methods to stem identity theft, establishing methods of records disposal and makes permanent the temporary preemption of state law that appeared in the original version of the FCRA.
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FACTA
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The first major overhaul of the Fair and Accurate Credit Transaction Act (FACTA), signed into law in December 2003, addressed the increasing crime of identity theft by giving consumers the right to file a complaint about an inaccurate credit report entry directly with the creditor and directed the creditor to investigate the consumer's claim. FACTA also offered consumers access to one free copy of their credit report every 12 months, allowed access to credit scores for a fee, authorized undisclosed access to an individual's credit report by government agencies for counter-terrorism purposes, made permanent certain aspects of the original credit reporting legislation set to expire on Dec. 31, 2003 and directed the Federal Trade Commission to implement procedures for disposal of records derived from credit statistic gathering.
Disposal Rule
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Under the FACTA, the FTC's rules for disposal of records became effective June 1, 2005. The directive requires the burning, pulverizing or shredding of paper records. Electronic records should be destroyed or erased to the point that the information cannot reasonably be restored. If a company contracts a disposal firm for this task, it must perform due diligence.
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Due Diligence
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Under the FACTA's rule for disposal of records, due diligence requires: accessing an independent audit of the contracted company's compliance with the rule; obtaining references about the contracted firm from several sources; obtaining certification from a recognized trade association; reviewing the disposal company's security procedures and taking appropriate measures to ensure the integrity of the proposed contractor.
Compliance Procedure
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To avoid penalties associated with the FACTA disposal rule, companies should consider compliance measures by identifying any department that handles consumer reports and bringing the department up to speed with the law's requirements. Review the current disposal policy and adapt it in accordance with the FACTA. Examine third-party contracts with disposal services and notify them of the compliance requirements. Train employees on proper disposal procedures.
Penalties
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Civil liability is an issue when individuals claim harm because of a company's negligence under the FACTA's disposal rule. If found liable, especially in the case of identity theft, awards can be substantial because the law permits recovery of actual damages sustained. If a company willfully fails to comply, consumers do not have to show harm. Each consumer may recover statutory damages of as much as $1,000. The FCRA directs the FTC to enforce penalties under the Federal Trade Commission Act. The FTC may conduct hearings, issue edicts and impose monetary penalties of up to $10,000 per violation. States may also bring action on behalf of their citizenry and may recover up to $1,000 for each negligence violation.
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