What you need to know:

• It applies to virtually every person and business in the United States
• It requires the destruction of consumer information before it is discarded
• Potentially severe penalties await violators

While the Federal Trade Commission has specifically called attention to Lenders, Insurers, Employers, Landlords, Government Agencies, Mortgage Brokers, and Automobile Dealers, the truth is that FACTA applies to every individual and business subject to the FTC's jurisdiction, which includes every person and business in the United States.

According to the FTC's FACTA disposal rule, "any person who maintains or otherwise possesses consumer information for a business purpose" must properly destroy discarded consumer information.

The FTC's FACTA disposal rule further states that every person and/or business, "must dispose of such information by taking reasonable measures to protect against unauthorized access to or use of the information in connection with its disposal."

What are reasonable measures? Reasonable measures, as defined by the FTC are "burning, pulverizing, or shredding of papers containing consumer information" or entering into "a contract with another party engaged in the business of record destruction to dispose of material, specifically identified as consumer information, in a manner consistent with this rule."

Potentially Severe Penalties Await Violators

Civil Liability: FACTA provides for substantial civil liability. In some cases, consumers may be entitled to recover their actual damages sustained as a result of a violation of the rule, and identity theft is costly. On average, individuals spend almost $1,800 out of pocket recovering from identity theft while businesses have out of pocket costs around $10,000. In other cases consumers may be able to recover statutory damages up to $1,000 for each consumer affected by a violation of the rule.

Class Action: Where large numbers of consumers are affected, they may be able to bring class actions seeking potentially massive statutory damages. If 1,000 consumers were affected, for example, a class action might seek up to $1,000,000.00 in statutory damages. Courts are also authorized to award punitive damages in either an individual suit or a class action. Finally, a successful plaintiff, or class of plaintiffs, may recover reasonable attorney's fees.

Federal Enforcement

The federal government is also authorized to bring enforcement actions in federal court for violations of the disposal rule. In some cases, the government pay bring an action in the federal district court for up to $2,500 in penalties for each independent violation of the rule.

State Enforcement:

The states are also authorized to bring actions of behalf of their residents and, in appropriate cases, may recover up to $1,000 for each willful or negligent violation of the rule. In cases involving multiple violations, such statutory penalties might quickly add up to very large sums.

Find out more on the FTC web site.