Shred, erase consumer information you’re not keeping in your workfile

The Federal Trade Commission (FTC)’s new “Disposal Rule” went into effect June 1, and it applies to you as it does to many businesses.  Chances are you don’t need to do much differently to comply but you do need to be aware of the new rules.

The rule requires businesses to take “appropriate measures to dispose of sensitive information derived from consumer reports.” The FTC notes that “any business or individual who uses a consumer report for a business purpose is subject to the requirements of the Disposal Rule.”

Among these are: lenders, mortgage brokers, and “entities that maintain information in consumer reports as part of their role as service providers to other organizations covered by the Rule” – appraisers who get loan application and other information either routinely or sometimes as part of a residential appraisal assignment.

USPAP requires you to preserve your working files, and that’s fine, because the Disposal Rule doesn’t require you to shred or destroy anything you’re otherwise required to keep.  But if you get consumer information in conjunction with an assignment that you won’t be keeping in your work file – that is, once you do determine that it needs to be disposed of – you need to comply with the Rule.

The FTC says you can “burn, pulverize, or shred papers containing consumer report information so that the information cannot be read or reconstructed.” Electronic files or media containing consumer report information should be destroyed or erased.

Consumer information collected by your lender clients may already be covered by the Gramm-Leach-Bliley Safeguards Rule.  If so, it trumps the new rule.  But they’ll know that.

You can download a PDF of the FTC’s alert on the new rule here.