A branch closing in 2026 puts 300 declined application files with credit reports into the building recycling bin. Does disposing of readable consumer-report files in ordinary recycling satisfy the Disposal Rule?
Correct Answer
C) Improper: consumer report information requires reasonable disposal
C. Ordinary recycling of readable consumer-report files does not provide reasonable disposal protection. Closing a branch or denying an application does not remove the sensitivity of the reports. Reasonable disposal prevents unauthorized access or use; shredding paper beyond readability or reconstruction is one example. Scope and exceptions: Secure disposal does not authorize destroying records before applicable retention periods or legal holds expire. Paper and electronic records need appropriate methods. Outsourcing requires due diligence, not merely choosing a bonded recycler. Source: Who must comply; What is proper disposal? — https://www.ftc.gov/business-guidance/resources/disposing-consumer-report-information-rule-tells-how
Why This Is the Correct Answer
C. Ordinary recycling of readable consumer-report files does not provide reasonable disposal protection. Closing a branch or denying an application does not remove the sensitivity of the reports. Reasonable disposal prevents unauthorized access or use; shredding paper beyond readability or reconstruction is one example. Scope and exceptions: Secure disposal does not authorize destroying records before applicable retention periods or legal holds expire. Paper and electronic records need appropriate methods. Outsourcing requires due diligence, not merely choosing a bonded recycler.
Why the Other Options Are Wrong
Option A: Improper: consumer report information must be kept for 25 years
It invents a 25-year retention mandate rather than addressing safe disposal.
Option B: Proper where the recycler is bonded and collects within 7 days
Bonding and a pickup deadline alone do not secure readable reports.
Option D: Proper, because declined applications create no ongoing relationship
The duty is not dependent on an ongoing borrower relationship.
Exam Tip
First determine whether records may be destroyed; then ensure disposal makes their information inaccessible.
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