A law is coming into effect this summer which mandates that employers destroy any confidential information – written or electronic – before throwing it out. This law also applies to private individuals who obtain information from job placement agencies regarding hired home health care aides, nannies, or housekeepers. They too are considered employers and will also be required to destroy any documents which contain personal information about their hired help.
This shredding requirement was recently added to the Fair and Accurate Credit Transaction Act (FACTA), which was approved by Congress a little over a year ago.
According to data from the National Crime Prevention Council, within the span of fiscal years 2002 and 2003, the number of identity theft victims of credit card, and social security fraud grew to 7 million Americans. Incidentally, 600 hours and roughly $1,500 are spent, on average, in restoring a previously untarnished credit history, after suffering identity theft.
FACTA will be a windfall to the paper shredder industry, which produces special equipment for both small scale domestic and office use, as well as for large scale enterprises whose sole business is paper shredding. The industry’s profits have continuously grown in recent years and it is easy to forecast that they will increase even further.
Until recently many small and mid-size firms ignored FACTA; now, they will need to take it seriously, if they want to avoid big problems. If confidential information were to fall in the hands of criminals as a result of a company’s failure to shred documents or to shred them properly, the company would be financially responsible – if not voluntarily, then certainly through the courts. FACTA allows for class action suits against the employer, with damages awarded not only to offset the individuals’ financial losses, but also to compensate for emotional damages.
That’s not all. Companies that neglect their duties under FACTA can look forward not only to punishment from the courts, but from the federal government and state authorities as well. Fines can reach $2,500 in addition to $1,000 per individual case.
It seems much better to spend $15 for the small shredder model or $2000 for the professional office paper shredder, rather than risk serious financial liabilities.
Some experts warn that the new law will hurt small businesses by pushing up their expenses. However, experts from Consumer Alert stress that identity theft needs to be addressed directly by law enforcement, not by introducing new bills.
While there is some truth to this, congress and local authorities will not reverse their position on the matter, which means that by June 1, 2005, employers will need to have their shredders ready.
Who steals confidential information most often?
* 70 percent - unknown criminals
* 13 percent - work colleagues, who have access to confidential information
* 11 percent - relatives
* 5 percent - peer co-workers
* 4 percent - former spouses
