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The Honolulu Advertiser
Posted on: Wednesday, May 3, 2006

Paper-shredding blitz spurs new concern

By Chad Graham
Arizona Republic

Demand for document destruction services is at an all-time high, driven by high identity-theft rates and new rules requiring businesses to properly dispose of personal information.

Companies large and small, homegrown and from other states, are stepping up to meet the need, especially in Arizona, which the Federal Trade Commission says has the highest rate of identity theft in the nation.

But while the shredding blitz has provided an economic boon, it also is causing concern among some longtime operators. Their worries: No state or federal agency regulates the industry.

Companies largely police themselves, guided by a nonprofit trade group based in Phoenix called the National Association for Information Destruction Inc., or NAID.

Some industry watchers fear that unscrupulous firms could pose as shredders, persuade businesses to hand over papers, and steal all kinds of information.

"The industry has exploded," said David Friedman, owner of Security Data Destruction Inc. in Phoenix and an NAID certified member.

Gone are the days when a company could dispose of bank statements, credit reports or patient histories by packing them in storage, chucking them into trash bins or shipping them in whole form to a recycling plant.

Of the three major federal laws designed to protect personal information held by companies, the Fair and Accurate Credit Transactions Act added disposal rules in 2005, suggesting that papers be burned, pulverized or shredded.

But even that hasn't completely taken care of the security risks.

As the act was being crafted, NAID executive director Bob Johnson said, the FTC expressed concern that the law "would create more demand for document-destruction services and that opportunists, with little regard for security, would take advantage of consumers who did not know any better."

NAID is in regular contact with the agency regarding the document-destruction issue.

Beth Bass, president of the Arizona Center for the Blind Document Destruction Center and an NAID member, said the group is doing a good job of oversight but "the government needs to step in as well. There are a lot of companies out there that don't do what they say."

Phoenix-based NAID, founded in 1994, has established a code of ethics and offers liability insurance and industry updates. Members can enroll in a voluntary certification program that sets standards for employee hiring, the destruction process and audits.

"It's really a 'buyer beware' situation," Johnson said of shredding companies that don't follow industry practices. "There are some guys offering services in this town that would freak you out if you saw their place."

Typically, companies find it too time-consuming and cost-prohibitive to hire an employee to shred documents. Instead they turn the materials over to a destruction company, usually paying a rate based on weight or amount.

Two types of basic shredding companies exist: those that pick up material and destroy it off-site and those that destroy material on-site, usually right in a company's parking lot.

The city of Phoenix uses the Center for the Blind's service to get rid of everything from legal memos to police reports, partly because "they do stress the confidentiality," said Mario Paniagua, deputy city clerk for the Records Management Division. "We've never had a problem."

Bass runs 10-year criminal background checks on all employees and an FBI background check on those who pick up materials. All drivers carry a mobile phone equipped with a Global Positioning System device to track their movement.

Digital cameras, guard dogs, infrared beams and other security protect the plant.

"There's nothing wrong with state law trying to put together some regulation for this industry," said Mari Frank, a Laguna Niguel, Calif., attorney and national expert on privacy and identity theft. "If a company doesn't comply with their standards or if a company is fly-by-night, they're going to give the rest of the industry a bad name."