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Right now the File Library mixes the system created folders with the user created folders. I suggest renaming the File Library to the Project Library and creating a new File Library named User Files and Folders. The problem I see is a user problem, but it seems to happen a lot. A user creates a new folder and just lets it inherit the permissions from the Parent Folder and now everyone on the project can view files even if they shouldn't be viewing those files. Trying to make the system more user friendly and intuitive and keep certain files from prying eyes.
