The FCRA Celebrates its Golden Jubilee!
Posted: November 09, 2020
Originally passed on October 26, 1970, the Fair Credit Reporting Act (FCRA) turned 50 this year! With a half-century under its belt, the FCRA has continued to protect American consumers while increasingly impacting the background screening industry and is only more vivacious with age.
To thwart the increasing amount of abuse in the credit reporting industry, the FCRA was passed to help ensure the accuracy, fairness and privacy of the information found within the files of consumer reporting agencies and was intended to protect consumers from having inaccurate information willfully or negligently included in their credit reports. Over the years, amendments have been made to the FCRA to provide even more rights to consumers with an aim to increase the accuracy of credit reports, prevent identity theft, and restrict the marketing of financial products.
The Gift that Keeps on Giving
Info Cubic can think of no better way to say ‘Happy Birthday’ to the FCRA than reviewing your background screening procedures and documents. With the end of the year approaching, now is also a great time to ensure that they are up to date and compliant with the Federal regulation as well as applicable state analogues (state- specific versions of the FCRA). Below are FCRA End User obligations that continuously prove to be areas of frequent litigation impacting employers.
Disclosure and Authorization
One section of the FCRA that is litigated most frequently is §604 Permissible purposes of consumer reports, specifically sub-section (b)(2), Disclosure to Consumer.
This section requires that any person procuring a consumer report for employment purposes must first provide a clear and conspicuous disclosure to the consumer, in writing, prior to being procured. The disclosure must be in a document that consists solely of the disclosure and must inform the consumer that aconsumer report may be obtained for employment purposes. Secondly, the End-User must obtain written authorization for the procurement of such a report by the End-User.
Info Cubic has put together a list of best practices regarding disclosure and authorization forms compiled by industry experts as well as the Federal Trade Commission (FTC) and recent court decisions.
§604(b)(3), Conditions on use for adverse actions, outlines a process that Potential Employers/Employers must follow any time a decision is made in whole or in part based on information in a consumer report that negatively impacts the consumer. This can include denying the candidate employment, terminating an employee, deciding not to promote an employee, or even demoting or taking responsibilities away from an employee based on the results of the background check. The purpose of the Adverse Action process is to allow the consumer to discuss the reports with employers or dispute the results of the report prior to adverse action being taken by the Employer.
Adverse action is a two-step process which consists of a Pre-Adverse (or Preliminary Adverse) Action notice and an Adverse Action (or Final Adverse Action) notice. The Pre-Adverse Action notice must be sent to the individual before an adverse employment decision is made. This Pre-Adverse Action notice must include a copy of the background report, a copy of the “A Summary of Your Rights Under the Fair Credit Reporting Act” and any additional state notice requirements. The notice must also specify the number of days the employer intends to wait before making a final decision. While the FCRA has no requirements as to how many days this should be, certain locations do have minimum waiting period requirements, so it is important for you to check with your legal counsel when creating your Pre-Adverse Action notice.
The Final Adverse Action Notice must include the adverse decision made, contact information of the CRA that compiled the report, a statement that the CRA did not make and cannot explain the decision, a Federal Summary of Rights, and a statement outlining the consumer’s right to another free copy of their background report, and their continuing right to dispute the information.
Info Cubic Can Help
As your background screening partner, Info Cubic wants to help ensure that you lower your risk and maintain compliance. Contact us today for a free assessment of your FCRA Disclosure and Authorization and current Adverse Action notices and procedures. Our FCRA-Certified Client Service Ninjas are standing by!
Any Information or assessments provided by Info Cubic are for educational purposes only. Info Cubic does not provide legal advice and recommends that you review all procedures and documents with Legal Counsel prior to implementation in order to guarantee compliance with all applicable state and federal laws and regulations.