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eLABORate: Employer Deadline Approaching to Update FCRA Form

September 18, 2018

Earlier this year, Congress passed the Economic Growth, Regulatory Relief, and Consumer Protection Act, which, in part, provides consumers the right to obtain from consumer reporting agencies security freezes free of charge. A security freeze is designed to protect victims of identity theft. Such a freeze generally stops all access to a consumer’s credit report.

The Fair Credit Reporting Act (FCRA) is the federal law that governs employee background checks, also known as consumer reports. Under the FCRA, employers are required to meet certain requirements before running a background check on an employee or prospective employee. At different stages of the process, employers are required to provide applicants or employees with a summary of their rights under the FCRA. This includes providing such information before an employer takes an adverse employment action based on the results of a background check.

Effective September 21, 2018, the required summary of rights must now include new language regarding a consumer’s right to a free security freeze. The new additional language in the revised summary is as follows:

You have a right to place a “security freeze” on your credit report, which will prohibit a consumer reporting agency from releasing information in your credit report without your express authorization. The security freeze is designed to prevent credit, loans, and services from being approved in your name without your consent. However, you should be aware that using a security freeze to take control over who gets access to the personal and financial information in your credit report may delay, interfere with, or prohibit the timely approval of any subsequent request or application you make regarding a new loan, credit, mortgage, or any other account involving the extension of credit.

As an alternative to a security freeze, you have the right to place an initial or extended fraud alert on your credit file at no cost. An initial fraud alert is a 1-year alert that is placed on a consumer’s credit file. Upon seeing a fraud alert display on a consumer’s credit file, a business is required to take steps to verify the consumer’s identity before extending new credit. If you are a victim of identity theft, you are entitled to an extended fraud alert, which is a fraud alert lasting 7 years.

The federal Bureau of Consumer Financial Protection has issued an updated version of a summary of your rights under the Fair Credit Reporting Act which complies with the new requirements, and should be used by employers to avoid unknowingly violating the FCRA after the effective date of September 21, 2018.