The Client Login Extension provided in the new version of Identity Manager writes a user's name and password to a local file when the user logs in. This file can only be read by a user that's logged in to the local workstation. This does not affect the IDM 3.5 CLE media or patch downloaded after Aug 1, 2007
CLE has since been fixed such that names and passwords are never written to a file. The file will also be deleted if it exists.