Personally, I don't like the practice, because there are some restrictions on copying some forms of photo IDs. For example, you can certainly examine and take notes on information from a U.S. military ID card, but it's illegal to copy them. In Indiana, you can't make a color copy unless you stamp it to identify it as a copy. There are enough problems or special rules that it makes more sense, really, to examine the ID and copy information from it.
But other than those special limits on photocopies, there isn't a general ban on putting them in credit files. I'd only be concerned if you had a lender check out one of the copies and then take an adverse action on an application from the individual whose license he looked at -- and had no legit reason for the denial.
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John S. Burnett
BankersOnline.com
Fighting for Compliance since 1976
Bankers' Threads User #8