THE POTENTIAL LIABILITIES OF FACTA

The Fair and Accurate Credit Transactions Act (FACT Act), signed in late 2003, by President G.W.Bush.

This law will affect virtually all companies in the U.S.

Among its provisions, this law mandates that businesses must take reasonable measures to destroy information derived from consumer credit reports before discarding them.

This law took effect early summer 2005.

Shredding papers and completely wiping or destroying hard drives and backup media will now be standard procedure everywhere.

Liability is caused by disclosure of customer data. These typically focus on the failure to provide adequate security or the failure of companies to follow their own data security policies.

Consider the following examples:

A private company that manages HMO programs for the Defense Department, currently faces a class action suit for negligence in a case which computer hard drives containing the names of over 500,000 military personnel ended up in the wrong hands.

Recently, state auditors randomly selected computers that were ready for auction or transfer, they discovered that over half of them contained personal confidential information, such as; credit-card information, medical records, and employee grievance reports.

Companies can also face liability for failing to notify customers when a security breach has occurred.

For more information on FACTA: www.ftc.gov

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