The Disposal Rule “requires the proper disposal of information in consumer reports and records to protect against ‘unauthorized access to or use of the information.’” ] “Reasonable measures for disposing of consumer report information could include establishing and complying with policies to: burn, pulverize, or shred papers containing consumer report information so that the information cannot be read or reconstructed; destroy or erase electronic files or media containing consumer report information so that the information cannot be read or reconstructed; or conduct due diligence and hire a document destruction contractor to dispose of material specifically identified as consumer report information consistent with the Rule.” 
Penalties for non-compliance: “In some cases, consumers may be entitled to recover their actual damages sustained … which, in the case of identity theft, could be very large. In other cases, consumers may be able to recover statutory damages of up to $1,000 for each consumer affected by a violation of the rule. … Where large numbers of consumers are affected, they may be able to bring class actions seeking potentially massive statutory damages … Courts are also authorized to award punitive damages in either an individual suit or a class action. Finally, a successful plaintiff, or class of plaintiffs, may recover reasonable attorneys' fees. … In some cases, the government may bring an action in federal district court for up to $2,500 in penalties for each independent violation of the rule … The states are also authorized to bring actions on behalf of their residents and, in appropriate cases, may recover up to $1,000 for each willful or negligent violation of the rule … As with private lawsuits, moreover, the state may recover its attorneys' fees if successful in such an action.” 
Please note: This is not legal advice and dealers should always seek the assistance of qualified legal counsel.
From "19 Laws, Rules and Regulations That Can Cost You More Than Money" in the September 2010 issue of Auto Dealer Monthly.