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Stephen Hershman was serving on the USS Kentucky submarine in 2003 when his identity was stolen, compromising his top-secret security clearance.

Forced out of his communications job, he spent several months straightening out his credit rating. That’s when Hershman thought of starting a service that provides customers access to an industrial-strength shredder that destroys documents on the spot. Hershman started a do-it-yourself shredding company, The Shred Stop.

“I was so fed up with it that I decided I had to find a better way of doing it,” Hershman said. “But I couldn’t find a way that I liked. I didn’t like the idea of dropping off my paper at a place with drop-off services like UPS. I really wanted to see it destroyed.”

Hershman was a systems-engineering major at the U.S. Naval Academy, so he was confident he could design a shredder’s hardware, but he needed someone to handle the software behind the machine. He proposed his idea to his friend Keith Rettig, who studied software design at Old Dominion University. Rettig was in.

In 2007, they launched The Shred Stop, which now has 17 kiosks in Safeway, Fred Meyer, Top Food & Drug and Haggen stores across the Northwest.

Hershman learned that his identity had been stolen by someone who took his utility bills from his trash and used them to open a post-office box.

An estimated 8.6 million households in the United States had at least one victim of identity theft in 2010, according to results from the National Crime Victimization Survey conducted by the federal Bureau of Justice Statistics. That’s a 33 percent increase from 2005.

Among those victimized, the crime stats indicate, less than 10 percent found their information had been stolen and used to open a new account, which is the type of identity theft that shredding personal documents can prevent. But those victims experienced major financial loss— nearly $13,200 on average.

Hershman started shredding everything with his name on it before disposing of it, but he quickly learned this wasn’t easy. He burned through several home shredders before he started looking for a more efficient method.

Hershman and Rettig’s original idea was a drive-through shredding service similar to an espresso hut, but they struggled to find an appropriate location. Brad Haggen, vice president of new business for the Haggen supermarkets, liked their idea but was only interested if they created a model that could be installed in stores.

They came up with a kiosk the size of a vending machine with a simple, user-friendly design. Customers can swipe their credit cards, press the “begin” button and start shredding. The machine can shred 50 sheets of paper at a time. The cost is $2.50 per minute.

The shredded paper is compacted into a big block. At first, Hershman drove to each kiosk daily to dump out the shreds. After a few days he realized that wasn’t going to work. Now he and Rettig pay Iron Mountain, a national shredding company, to remove the waste and recycle it.

Hershman and Rettig take pride that their kiosks are manufactured and assembled in the United States. The shredder is made in Michigan; Bowman Manufacturing in Arlington, Snohomish County,assembles the frames; the electrical panels and wiring connectors are made by Elpac in Mukilteo.

“When we started this company we wanted to get as local as possible,” Hershman said.

Hershman and Rettig initially put up about $100,000 of their own money to launch the Lynnwood company. After designing their first prototype, they asked friends and family to invest and were approached by a small investor who had tried to start a similar company but was unsuccessful. Now there is about $750,000 invested in The Shred Stop.

While not saying exactly what each kiosk is worth, Hershman said it’s comparable to the price of a small sedan.

He said the time customers save by using an industrial-strength shredder makes the service worthwhile.

“Your time is valuable,” Hershman said. “If you have a box of paper to shred, putting it through a home shredder is going to take two hours, and putting it through our kiosk is going to take five minutes.”

Patrick Vezetinski has used The Shred Stop at Top Food & Drug in Edmonds and said he plans to continue using it instead of his home shredder when he needs to dispose of large stacks of paper.

“I go to Top Food quite a bit, and when I saw the service I was a little skeptical to start with,” Vezetinski said. “So I brought in about 500 pages of paper to see what it was like, and I was pleasantly surprised by how well it worked. I didn’t even have to pull out staples or paper clips.”

Hershman said he and Rettig are still spending a lot to manufacture the kiosks and drive awareness, so they haven’t started turning a profit yet or hiring any employees.

“With kiosk companies, you need a base of at least 100 kiosks before you can really show good profit,” Hershman said.

Although they are targeting small-business owners, Hershman said The Shred Stop was created for anyone whowants to safeguard against identity theft.

“Once you have a family and some assets, you realize you’re at a point in life where you have some things you need to protect,” Hershman said.

Sarah Elson: 206-464-2718 or