In the wake of the overturned Arthur Anderson criminal conviction, the federal government has implemented a rule that requires mortgage companies to destroy documents and computer files.
Since June 1, lenders and brokers have been required to abide by the Disposal Rule, which requires businesses and individuals to take appropriate measures to dispose of sensitive information derived from consumer reports, the Federal Trade Commission announced. The rule, a part of the Fair and Accurate Credit Transactions Act of 2003, was created as a way to prevent unauthorized access to or use of consumer report information.
A consumer report is defined as including information obtained from a consumer reporting company that is -- or expected to be -- used in establishing a consumer's eligibility for credit, employment, or insurance, among other purposes. Examples of consumer reports include credit reports, credit scores, reports businesses or individuals receive with information relating to employment background, check writing history, insurance claims, and residential or tenant history, according to the announcement.
Last week, the U.S. Supreme Court revealed its decision to reverse a criminal conviction against Arthur Anderson. The accounting firm had been convicted because it directed employees to destroy documents as part of a retention policy while the company was under criminal investigation. But the court noted in its decision, "The jury instructions failed to convey properly the elements of a corrupt persuasion conviction."
Lenders, brokers or any individual using such information for a business purpose are allowed to determine what disposal practices are reasonable and appropriate based on the sensitivity of the information, the costs and benefits of various disposal methods, and changes in technology. Although the Disposal Rule applies to consumer reports and the information derived from consumer reports, the Fed recommended taking protective measures to dispose of any records containing a consumer's personal or financial information.
The information, whether its on paper, electronic files or media, must be disposed of so as to not be read or reconstructed, the FTC reported.