Data security laws and keeping copies of client checks

QUESTION: Our office has been in discussion about making and retaining copies of Due Diligence and Earnest Money Checks from our clients. We are concerned with the laws on keeping the personal information of clients and customers in a secure manner. Is it required that we keep copies of the checks? Any thoughts or direction on this would be great.

ANSWER: Before answering your question, we’d like to say that you are right to be concerned about the risks of maintaining personal information about your clients and customers.  Bank account numbers on earnest money deposit and due diligence fee checks most certainly constitute personal information under State and Federal laws that impose legal requirements on persons who are in possession of the personal information of a consumer to maintain and dispose of such information in a secure manner.  You should avoid keeping records containing the personal information of a consumer unless it’s necessary, which brings us to your question.

To answer your question, you are required by Real Estate Commission Rule 58A.0117 to “create, maintain, or retain…copies of earnest money checks, due diligence fee checks, receipts for cash payments, contracts, and closing statements in sales transactions” among many other records.  If you do any property management, you would be interested to know that although the Rule requires you to keep copies of security deposit checks, it does not require you to keep copies of tenant rent checks.

We have been told informally by members of the Real Estate Commission’s legal staff that it is not permissible to redact (mark out) bank account numbers on copies of checks that you are required to keep unless the redaction can be reversed.

For more information on record retention and data security laws, check out the Data Security and Privacy Toolkit on the NAR website at  Enter “Data Security and Privacy Toolkit” in the search box at the top of the home page.

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