Dennis Merley View Biography

As we are all aware, consumer fraud and related harms, including identity theft, has grown tremendously over the last decade. In response, the federal government enacted the Fair and Accurate Credit Transactions Act of 2003 (FACTA) to reduce the risk of consumer fraud, including identity theft, created by the improper disposal of consumer information. To accomplish this goal, FACTA mandated the promulgation of regulations that require any person, business or employer who possess information from a consumer report to adopt procedures to ensure that when the information is disposed, abandoned or transferred it is done in a manner that protects against unauthorized access to or use of the information. Accordingly, the FTC promulgated the Record Disposal regulations, which are effective June 1, 2005.

How does an employer know if the new regulations apply to them?

The Record Disposal regulations apply to any employer that has consumer information, meaning “any record about an individual, whether in paper, electronic, or other form, that is a consumer report or is derived from a consumer report.” In short, if an employer has information from a consumer reporting agency bearing on an employee’s credit worthiness, character, general reputation, or personal characteristics and the employer utilized the information for an employment purpose, the employer must comply with the Record Disposal regulations before June 1, 2005. Therefore, if, for example, an employer obtained a background check for an employee that contains information from a credit reporting agency and the employer utilized the information for an employment purpose, the employer must comply with the Record Disposal regulations.

Ryan Olson View Biography

What does an employer need to do to comply with the Record Disposal regulations?

Employers need to (1) implement a Record Disposal policy that requires “the burning, pulverizing, or shredding” of papers and electronic media (i.e., computer hard drive, diskettes, CDs etc.) containing consumer information so that the information cannot practicably be read or reconstructed unless a sufficient policy already exists, (2) train employees on how to comply with the policy, and (3) monitor policy compliance.

Can an employer incur legal liability for non-compliance?

Yes. FACTA provides employees with a private cause of action. For willful violations, employees can recover actual damages (or statutory damages up to $1,000), punitive damages, and litigation costs, including attorney’s fees, from their employer. For negligent violations, employees can recover actual damages plus litigation costs, including attorney’s fees. Moreover, an employer who knowingly violates FACTA can be fined up to $2,500 per violation by the federal government and up to $1,000 per violation in an action commenced by a state.

If you have any questions about this issue, please contact Dennis Merley, Ryan Olson or your regular Felhaber contact. Dennis Merley can be reached at 612-373-8434, and Ryan Olson can be reached at 612-373-8514.

Founded in Saint Paul in 1943, Felhaber, Larson, Fenlon and Vogt, P.A. has offices in Minneapolis and Saint Paul. With over 55 attorneys, the firm serves clients in the areas of corporate and commercial law, employee benefits, employment law, estate planning, health care, intellectual property, labor law representing management, litigation, real estate, transportation law, and workers' compensation.