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Employers Must Provide Updated FCRA Notice by January 1, 2013

On November 16, 2012 by Schnader in Labor and Employment
By Scott J. Wenner 

The Fair Credit Reporting Act (FCRA) imposes notification and other requirements on employers when they contract with agencies third parties to perform background checks on job applicants and employees. The FCRA also regulates providers of background checking services, which the statute refers to as “credit reporting agencies,” by imposing further notification and reporting requirements, as well as obligations relating to the accuracy of the information reported.

Until recently the Federal Trade Commission (FTC) was responsible for enforcing the FCRA.  With the passage of the Dodd Frank Wall Street Reform Act in 2010, enforcement authority for the FCRA passed to the newly-established Consumer Financial Protection Bureau (CFPB).  Fortunately for employers, the CFPB has not yet made substantive changes to the regulations that spell out the rules employers must follow in obtaining background checks. However, that agency has directed that employers must inform employees and applicants of the shift in enforcement responsibility from the FTC to the CFPB.  This is to be accomplished by substituting a new form of notice summarizing employee rights that must be provided to job applicants and employees in some circumstances in place of the form presently in use.

Key Point:  By January 1, 2013, employers must update the notices they are required to provide to job applicants and employees under the FCRA. The modifications that must be made pertain strictly to the “Summary of Rights” form.  That form must be provided to an applicant or employee (i) along with a “pre-adverse action” notice that must be given to applicants and employees before an employer bases a negative employment action on results obtained from a background check, and (ii) as part of the disclosures mandated when an employer decides obtain “investigative consumer reports”.  These are background checks that are based in part on personal interviews conducted by consumer reporting agencies.

FCRA Obligations for Employers Encapsulated

  1. Employers must confirm to a credit reporting agency performing a background check that (a) it provided the required notice and obtained consent for the background check from the applicant or employee; (b) it is otherwise in compliance with FCRA; and (c) it will not use any information obtained for discriminatory or other unlawful reasons.
  2. Before making adverse decision based on results of a background check employers must provide (a) notice of its intended decision enclosing a copy of the background report, and (b) a copy of the FCRA Summary of Rights form.
  3. If adverse action is taken based on the report employers must provide an adverse action notice advising the employee or applicant of their right to (a) review the information reported and (b) to correct inaccurate information.
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