Social Security Numbers, Financial Info Often Left Unshredded, In Dumpsters

An unfortunate byproduct of the mortgage meltdown apparently has been the heightened exposure of sensitive personal information about thousands of borrowers as bankrupt mortgage companies dump customer files without regard for privacy.

According to MSNBC, a pattern of grossly negligent disposal of customer files has emerged from several incidents around the country, as reported by local NBC-TV affiliates.

For example, thousands of loan documents maintained by First Magnus Financial Corp., which went out of business last fall, were discovered in boxes in an unlocked trash dumpster in Fort Lauderdale. The documents included borrowers' Social Security and credit card numbers and all the rest of the sensitive personal and financial information that Americans turn over when they seek a home loan.

First Magnus was one of the nation's largest mortgage lenders. Just last year, a magazine article described it as a "technological powerhouse" ready for the future thanks to its "tech-savvy management team." Its headquarters was one of the biggest employers in Tucson, Ariz. But the incident showed that most of its borrowers' records were still on paper. Faye Wenzlick, director of senior programs for the Better Business Bureau in northwestern Ohio, learned from a senior who called that the records of hundreds of former customers of the defunct Alpha Mortgage Services - including Social Security numbers, wage statements and checking account numbers dating back to 2000 - were left in a recycling bin behind a grocery store in Toledo. She reported the improper disposal after an older man called her over to the bin. "He said two cars ... were filled up with this stuff and dumped everything and left," Wenzlick recalled.

Other incidents included:

• After Union Mortgage Services of Ohio shut down last month, confidential files on hundreds of people were thrown out in a dumpster behind a pizza shop in Cleveland. "That's appalling," said Ken Knabe, a lawyer in the Cleveland suburb of Lakewood whose bank accounts, credit reports, tax returns and other personal information - including his Social Security number - were recovered by NBC affiliate WKYC-TV. "This is private information in a dumpster."
• Sheriff's deputies in DeKalb County, Ga., outside Atlanta, found the mortgage records of at least 1,200 former customers of Ameriquest Mortgage Co. in a dumpster behind an apartment complex in October, two years after the company, once one of the nation's biggest subprime lenders, went out of business.
• In December, the state of Ohio filed suit against the former president of Randall Mortgage Services Inc. four months after it closed up shop, leaving behind the unsecured records of its customers, including SSNs, credit reports, wage statements and bank account numbers. The best the State can hope for is a $25,000 fine and a promise not to do it again.
• In Honolulu last year, a handyman hired by the former president of the defunct Fidelity Escrow Services dumped 39 boxes of financial records in a recycling bin. "SSNs, bank account numbers, credit reports, credit card statements - you name it, everything was in there," said Jim Kelly, a business journalist who stumbled on the boxes when he took out his own recycling.

The 2003 Fair and Accurate Credit Transactions Act, or FACTA, requires businesses to dispose of sensitive financial documents in a way that protects against "unauthorized access to or use of the information." The FTC advises businesses to burn, pulverize or shred paper documents so they can't be reconstructed. But one of the weaknesses of FACTA is that it doesn't actually require physical destruction of data; instead, the regulations, known collectively as the Disposal Rule, offer only what the agency calls a "flexible ‘reasonable measures' standard."

Since the 2½ years since the Disposal Rule went into effect in June 2005, the FTC has brought one case. The FTC announced in December that it had reached a settlement with American United Mortgage Co. of Northbrook, Ill., which left hundreds of borrowers' financial documents, some of them including Social Security numbers, in an unlocked dumpster, many of them in open trash bags.

Although the FTC said the company was found to have repeated the practice at least twice after it issued a warning in March 2006, the agency agreed to settle the case for only a $50,000 fine and American United's promise not to do it again.

"Every business, whether large or small, must take reasonable and appropriate measures to protect sensitive consumer information, from acquisition to disposal," then FTC Chairwoman Deborah Platt Majoras said in announcing the settlement. She promised that the FTC would "continue to prosecute companies that fail to fulfill their legal responsibility to protect consumers' personal information." However, experts said enforcing the rule against bankrupt mortgage companies would be difficult or impossible.

from The Privacy Times

Note: When posting a comment, please sign-in first if you want a response. If you are not registered, click here. Registration is easy and free.

Only registered users can write comments.
Please login or register.