Why Does the Fair and Accurate Credit
Transactions Act Matter to Me?
As an employer, what you don�t know about the Fair and
Accurate Credit Transactions Act can definitely hurt you.
FACTA, the new law, stands for Fair and Accurate Credit
Transaction Act. The Fair and Accurate Credit Transactions Act creates a
policy which allows any American access to their
credit report once per year. The law went into effect Jan. 1, 2005. So
what does that mean for you as an employer?
On June 1, 2005, a new portion of The Fair and
Accurate Credit Transactions Act goes
into effect. It says that any employer (even if you only employ one person, and
you have their personal information so that you can pay social security taxes,)
whose action or inaction results in the loss of employee information, can be
fined by federal and state government, and sued in civil court.
A USA Today article on the Fair and Accurate
Credit Transactions Act from Jan. 14. 2005,
stated �Bet you didn't know that.� But you need to know, and need to know what
procedures you can put into place to protect yourself.
Small Businesses affected the most by the Fair and Accurate Credit
�"A small businessman who makes a mistake could bear the brunt of a
regulation like this," says James Plummer, policy analyst at Consumer Alert, a
non-profit group that focuses on a free-market approach to consumer
The USA Today article goes on to say that �if you
don't shred and information gets out, there are penalties.� But what if you do
shred all potential employee information, and take all necessary procedures to
protect your past, current, and future employees� identities, and the
information still gets out somehow? Under the Fair and Accurate Credit
Transactions Act, you could still be held
You may not think information theft could happen
to you as an employer, but neither did this short list of companies, universities, government
institutions, and businesses that have had employee or customer information
stolen from them:
DSW Shoe Warehouse
University of Northern Colorado
California State University (Chico)
University of California � Berkeley
University of Maryland
Las Vegas Department of Motor Vehicles
Bank of America
Weld County (CO) Employees (information stolen
by an inmate while in jail)
How can you, as an employer, minimize your liability?
There are hundreds of procedures you can take to reduce liability, which are
probably things you already do. Document shredding, redaction of electronically
stored information, careful screening of employees who will be coming into
contact with personal information of customers and employees, physically locking
file drawers with sensitive information, and setting up firewalls on computer
equipment connected to the Internet, among hundreds of other solutions, are all
good ideas. The old saying that an ounce of prevention is worth a pound of
cure is definitely the case when it comes to securing personal information.
However, no matter what preventative procedures you put into place, there is no 100% effective
way to be sure that employee�s information won�t be compromised. Even if the
information doesn�t get out from your company, an employee can claim that it
That's a scary thought! What if an employee
claims that their information was stolen through the actions of your company,
but there�s no real proof to back it up? You will end up hiring (or using) an
attorney to represent and defend your company in court. At $150 - $200/hour for
most attorneys across the United States, how long can you afford to defend your
So what can you do?
The only sure solution, or at least the only solution that would at least
provide an affirmative defense against the fines, fees, and lawsuits you could
incur as an employer under the Fair and Accurate Credit Transactions Act, is to offer some sort of Identity Theft protection policy as a
benefit to your employees.
As an employer, you can choose whether or not to
pay for this added benefit. However, the most important thing you can do is to
make the protection available, and have a mandatory employee meeting, similar to
what you probably already do for health insurance, to help employees understand
Identity Theft and the protection that you are making available to them. When
you make the protection available, and include it as part of your employee
training, and when your employees have been educated on
the dangers of Identity Theft, they can either elect to have identity theft
coverage as a benefit, or they can decline the coverage as a benefit.
If the employee has Identity Theft coverage and
becomes a victim, it is beneficial to your business, because an employee with
Identity Theft coverage will spend less time, less money, and will experience
less frustration while trying to have their information restored. This will get
them back on the job and focused on work more quickly.
If the employee declines the coverage, and later
claims that the information was stolen as a result of you or your company�s
actions, you have a piece of paper, with their signature, saying that they
attended the presentation, that the presentation is a part of the procedure you
take when hiring any employee, and that the employee declined the coverage.
Choosing to not make Identity Theft coverage
available leaves you exposed to a slew of costs under the Fair and Accurate
Credit Transactions Act. They include making you responsible for: the unlimited dollar amount that you can be sued
for under civil liability, federal fines of up to $2,500.00 per employee per
incident, and state fines of up to $1,000.00 per employee per incident.
Recommended course of action? Have a benefits
consultant who offers an Identity Theft protection plan present to your
employees. Help them set up a 20 minute presentation with your employees.
As a matter of company policy, make it mandatory that all employees attend. You want your employees to be
protected from this awful crime. If they choose not to be, but you�ve given them
option of being protected as part of your normal, then the liability becomes theirs, not yours, when
they become a victim of identity theft.
Jonathan Kraft is a
benefits consultant who specializes in educating people about how they can get
affordable access to the legal system. Because of his work in the field of
electronic Identity Theft, he has come to be known as Colorado�s Foremost Expert
on Computer Related Identity Theft.