Shredding Laws

Shredding Laws

by Kevin J. Shay
7/8/2005 – The federal government’s efforts to crack down on identity theft have bolstered an already-burgeoning industry: document shredders.

The Federal Trade Commission’s Fair and Accurate Credit Transactions Act of 2003, which took effect last month, requires companies to destroy consumer report documents such as credit reports, insurance claims and residential and medical histories.

Industry experts expect the shredding trend to snowball.

“There is already another generation of federal and state laws on the horizon that will be even stronger,” said Bob Johnson, executive director of the National Association for Information Destruction in Phoenix, an industry organization with more than 500 members.

There are about 2,000 companies in the U.S. and Canada that destroy documents, about triple the number in 2000, Johnson said. That number should continue to grow, aided by the new laws, he said.

About 9.9 million Americans fall prey to identity theft each year, according to an FTC random telephone survey in 2003. A similar survey by Javelin Strategy and Research of Pleasanton, Calif., and the Better Business Bureau released earlier this year put the number at 9.3 million for 2004, down from 10.1 million in a Javelin report in 2003.

Such fraud costs businesses $47.6 billion annually, or $4,800 per victim, in unauthorized charges on phone bills and credit cards to rent homes, get medical care and buy goods, the FTC says.

Complaints filed with the FTC rose 11.8 percent in Maryland to 4,612 last year from 2003. While that’s lower than the overall national increase of almost 15 percent to almost 250,000, Maryland has ranked among the top 15 states in reported per capita identity theft the past two years. Washington, D.C., has led the nation.

Claudia Bourne Farrell, an FTC spokeswoman, said many consumers don’t report thefts to the FTC or aren’t aware they should. This helps explain the discrepancies between the survey results and FTC numbers, she said.

Data broker ChoicePoint and news and information company LexisNexis are among businesses that have had personal information about employees or clients stolen in recent months. But the BBB/Javelin survey found that most identity theft occurs offline.

Shredding companies
report more business

Companies such as Torn2Shredz, a Mount Airy business that formed this year and uses a mobile truck to shred documents at sites across Maryland, report more interest. But a lot of business officials still aren’t aware of the new law, said Steve Rose, president of Torn2Shredz.

“There is an increased awareness in some markets of the new law, but other markets that are directly affected are not aware of the new law,” he said.

While the regulation does not spell out how long businesses can keep consumer information before it is destroyed, the law says that businesses, government agencies and individuals who hire contractors must take “reasonable measures” to protect against theft of information. Such measures are defined as “burning, pulverizing or shredding” documents, which include computer files and disks, microfilm and videotapes, as well as paper.

That consumer information can be anything from Social Security numbers and phone numbers to payroll records, personnel information and invoices, Rose said. Penalties of up to $2,500 per violation can be assessed.

Capital Shredding, a Columbia business that began in 2001, now has 10 trucks that cover not just Maryland but Delaware, Pennsylvania and Northern Virginia, said Jennifer Pratt, company president.

“We have noticed that we are getting more phone calls from both businesses as well as residential customers,” Pratt said. “Local businesses, even the smaller ones, are realizing that it is the law and they have to comply.”

Monthly programs start as low as $50, she said.

Cintas Corp., a Cincinnati company more known for supplying uniforms, has seen its document destruction division grow to more than $40 million in revenue since beginning about three years ago, said Todd Schneider, vice president of Cintas’ document management unit.

The company has 23 document destruction sites across the country, including one in Baltimore. The Baltimore facility has about 12 employees who shred documents onsite in trucks that cost about $250,000 and also in a fixed shredder in the plant, Schneider said.

“Certainly, the new law has been positive for us,” he said, adding that other federal laws such as the Health Insurance Portability and Accountability Act also have helped. “We make a living by helping people comply with these laws. A lot of customers were doing that already.”

A shredding company can save businesses money in this process, Rose said. His truck’s shredder can speed through more than 6,500 pounds per hour, he said.

“Our service can destroy in less than four minutes what it will take the average small office shredder 133 hours to destroy,” Rose said. “Paying someone $8 an hour to shred 300 pounds of documents would cost a company $1,064 and take them away from more productive business-related tasks.”

A video monitor on the outside of the truck allows Rose’s customers to view the shredding process. Customers can obtain a destruction certificate and even a DVD for their records.

The shredded paper is mixed together to prevent reconstruction and delivered to a recycler. Cintas alone recycles about 500,000 pounds of paper daily, spokesman Mike Wallner said. “It’s not going to the landfills,” he said.

Torn2Shredz also provides an “important form of business insurance” by protecting customers from potential lawsuits related to identity theft, Rose said.

Businesses already

All businesses have documents that should be kept private — even individuals who hire domestic help do, said Johnson of the national trade group.

But representatives from some businesses said their companies were already adequately destroying consumer information.

“It hasn’t had any impact on us,” said William Sheridan, president of Plus Computing Corp., a small Germantown provider of systems integration, network administration and similar services. “We already did that because we have a document destruction policy in place. That’s just common sense.”

Equifax, an Atlanta credit reporting company that has a Baltimore office, recently unveiled a CD giving pointers to businesses and individuals on how to guard against identity theft. The company also provides an online monitoring service to eBay users that alerts them of major changes to their credit reports.

Another aspect of the new law is that it allows people to request free credit reports to monitor any changes once a year from three major companies, Equifax, Experian and Trans Union. The service will be available starting in September in Maryland.

While the latest regulation will create new customers for document-destruction companies, the industry was already prospering due to other laws such as HIPAA, Johnson said.

“The long term for our members looks good,” he said.

paper shredding services