Recordkeeping and Destruction of Records

Both the federal government and most states have adopted a form of the Uniform Photographic Copies of Business and Public Records as Evidence Act. Except for certain limited categories of documents, states generally permit the conversion of paper documents to electronic form for recordkeeping purposes. Federal and state evidence laws also permit the use of electronically converted documents in lawsuits or regulatory proceedings. The overriding requirements are that the electronic records be authentic reproductions of the original and be deemed to be reliable, trustworthy, and accurate. A paper record should be electronically captured at or near the time of the event or transaction and must be complete and available for retrieval as requested for regulatory or business purposes. The context and the structure of the electronic record must also be preserved for the full retention life of the record, including any migration of the record from one system or medium to another. If a record is electronically converted in a trustworthy manner, the original paper record generally can be securely destroyed.

As you know, federal privacy laws and regulations require that documents containing personal customer information must be handled, maintained, and disposed of in a secure manner. If these documents and records are not securely maintained or not securely destroyed when no longer required or of use or value, they may be vulnerable to unauthorized acquisition or use – for example, to perpetuate identify theft, or to commit a fraud. Further, a dealership may be subject to an enforcement action by the FTC for violating the Safeguards Rule and Disposal Rule or in private litigation or administrative proceedings under state law.

The FTC has cited companies for keeping consumer information longer than is necessary as a shortcoming in data security that, along with other security deficiencies, can constitute “unfair acts or practices” in violation of Section 5 of the FTC Act. Again, the FTC has repeatedly stated its position that you should keep records containing customer information only for as long as necessary, and then destroy them in a secure manner, uniformly for both paper and electronic records.

In the event of actual or threatened litigation or regulatory enforcement proceedings, a dealer should immediately implement a “litigation hold” process suspending all electronic and physical document destruction and requiring employees to identify and preserve relevant documents, including emails and text messages. Even inadvertent or negligent destruction or loss of email, texts, or other documents relevant to a threatened or pending lawsuit or investigation can be grounds for a court to impose sanctions for “spoliation” (destruction) of evidence. Recently, a number of states have recognized private tort claims for the negligent spoliation of evidence.