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By Mindy Fetterman, USA TODAY
Starting Wednesday, employers must destroy personal information about their employees before they throw it out if they got the information from a credit report.
That means "shredding or burning" paper documents or "smashing or wiping" computer disks.
All employers — even if they have only one worker — are covered by the new regulations, which are part of the Fair and Accurate Credit Transactions Act passed in December 2003.
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Even individuals who employ a nanny or a yardman, for instance, and who have run a credit check must pulverize information before they throw it out. Employers could face state and federal fines or class-action lawsuits by employees.
"Because the credit report is such a huge piece of personal information, this is an excellent addition to protecting consumer information from beginning to end," says Jennifer Schwartzman, a spokeswoman for the Federal Trade Commission.
The regulations are part of a government effort to crack down on identity theft. The identities of about 7 million Americans were stolen in 2003 and their personal information used to set up credit card or bank accounts, according to two studies. Thieves get the information in a variety of ways, from stealing wallets to online scams to hacking into computer networks.
Recent scandals involving the theft of Social Security numbers and other information have highlighted the vulnerability of personal information in the digital age. Data broker ChoicePoint, news and information broker LexisNexis, the University of California at Berkeley and Time Warner are among companies that have had personal information on their workers or customers stolen recently.
But some identity theft comes in old-fashioned ways, such as going through garbage to find bank receipts and credit card bills.
"We don't know how much identity theft happens because of 'dumpster diving.' No one knows," says Robert Johnson, executive director of the National Association for Information Destruction, which represent industrial shredding companies. "We're happy to admit that it is only a percentage of the problem. But we don't know if it's 5% or 40%."
Johnson says the new regulation has sparked demand for paper and computer disk shredding services. "We're seeing an increase from auto dealers, apartment complexes, appliance stores — companies that haven't been interested before," he says.
The personal shredder industry, too, expects an increase in sales. "We've had a huge increase over the past several years, and because of the new legislation, we expect it to continue," says Sharyn Frankel, spokeswoman for Staples. Sales of personal shredders at Staples rose 18% in 2004 vs. 2003, she says.
The biggest trend the company sees: "More and more people are looking to upgrade their shredder," she says. "Before, you just worried about paper." But because of the new rule, "now you need one that can shred a floppy disk or a credit card."
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