Stacks of old client files crowd the back room of your brokerage – contracts from a decade ago, photocopies of driver’s licenses, inspection reports. They’ve been “out of sight, out of mind” for years. That is, until a break-in at the office leads to those files being rummaged through. Suddenly, you’re scrambling to figure out what was in those boxes and whether you’re liable for any fallout.

Simply holding onto documents forever or tossing them in the trash when you feel like it isn’t a safe strategy. Every brokerage – big or small – should have a records destruction policy: a formal plan for how long to keep business and client records and how to securely dispose of them when that time is up. Here’s why it matters and how to put one in place.

The Risk of Keeping Documents Too Long

Hoarding old paperwork “just in case” can backfire. Firstly, the more data you retain, the more you have to lose. A decades-old file with a client’s Social Security number is just as valuable to an identity thief as a recent one. If you experience a theft, fire, or data breach, those unnecessary old records increase the damage.

There’s also legal risk. Different laws require keeping certain records for a minimum time (for instance, some states require real estate transaction records be kept for X years). But after that, holding onto personal data indefinitely can violate privacy regulations.

In fact, U.S. federal law (the Fair Credit Reporting Act) mandates that if you possess consumer report information (say, a credit report for a tenant or loan application), you must dispose of it properly when it’s no longer needed​(ftc.gov). Failing to do so can lead to penalties. In other words, keeping sensitive data without a plan isn’t just messy – it could be unlawful.

Dangers of Improper Disposal

Maybe you do purge files periodically – but how you do it is just as critical. Simply chucking documents in the recycling or dumpster is a recipe for disaster. There are real cases of fraudsters dumpster-diving behind offices to find loan applications and personal data.

One mortgage broker learned this the hard way when regulators caught them tossing client files in public dumpsters, resulting in hefty fines and reputation damage. Even less nefarious but still harmful: A good Samaritan finds your client’s financial statements blowing down the street – and that client sues your brokerage for negligence in safeguarding their info.

Likewise, deleting electronic files isn’t enough if they’re not truly “wiped.” Old computers, USB drives, or email accounts can yield troves of data if not securely erased. Improper disposal can nullify all the goodwill you’ve built with clients. It only takes one headline-making incident of “Brokerage exposes client data” to lose trust.

What Is a Records Destruction Policy?

It’s more than just “shred stuff.” A records destruction (or retention) policy is a written plan that spells out what records your company keeps, how long you keep them, and how you destroy them when it’s time. It covers both physical and digital records. For example, you might decide:

• Transaction files (contracts, disclosures) are kept for 5 years after closing, per state law, then shredded or permanently deleted.
• Client personal data (copies of IDs, credit checks) are kept only as long as necessary for the transaction or as required by law, then securely destroyed.
• Internal company documents (financial, HR, etc.) follow relevant regulations (e.g., IRS rules might dictate 7 years for tax records) and then are disposed of.

A good policy also assigns responsibility – e.g. an office manager or compliance officer oversees yearly file purges – and defines acceptable destruction methods (cross-cut shredding, incineration, or using a professional shredding service for paper; secure wipe or destruction for electronic media).

The FTC advises businesses to “collect only what you need, keep it safe, and dispose of it securely” as part of a sound data security plan (​ftc.gov). A records destruction policy puts that advice into action in a systematic way.

How to Implement Your Policy

Ready to put one in place? Here are steps to get started.

1️⃣ Inventory Your Records

Make a list of the types of records you have (client files, emails, transaction documents, MLS printouts, etc.), and note any legal requirements for retention. Your state real estate commission or association may have a retention schedule to guide you.

2️⃣ Decide on Retention Periods

For each record type, set how long it will be kept. Meet legal minimums, but don’t keep things longer “just because.” If unsure, consult an attorney or refer to industry guidelines. Common timelines are 3-5 years for transaction files, longer for corporate financials.

3️⃣ Choose Destruction Methods

Specify how each type of record will be destroyed when its time is up. Shredding is standard for paper (invest in a quality cross-cut shredder or a bonded shredding service). For electronic files, use secure deletion software or physically destroy drives – simply hitting “delete” doesn’t truly erase data.

4️⃣ Put It in Writing (and Practice)

Document the policy and share it with your team. Train employees on the procedures – for example, have clearly marked bins for shredding and make it a rule that no client paperwork goes into regular trash. Schedule regular destruction dates (say, every quarter go through and purge files older than retention date).

5️⃣ Monitor and Update

Assign someone to ensure the policy is followed. Periodically review the policy – if laws change or your business practices evolve (e.g., you go paperless with new software), update accordingly.

Important Data Handling

By implementing a records destruction policy, you’re showing clients, partners, and regulators that you take data handling seriously. It’s a key part of a broader risk management strategy.

Should a question ever arise about a missing file or a data leak, you can demonstrate that you had a clear system in place for protecting and appropriately disposing of information – which greatly reduces your liability.

In short, don’t wait for a scare (like finding your old files in the wrong hands) to act. Clearing out the clutter responsibly isn’t just spring cleaning for your brokerage – it’s critical protection for your business and your clients.

As one of the FTC’s guidelines emphasizes, this kind of plan isn’t just about tidiness, it helps meet your legal obligations to safeguard sensitive data​ (ftc.gov). So, shred away – with purpose!

To Learn More...

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