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eLABORate: Employer Deadline to Update FCRA Notices

September 24, 2012

Employers face a January 1, 2013 deadline to update the notices they must provide to employees pursuant to the Fair Credit Reporting Act ("FCRA" or "the Act"). The requirement and deadline are the result of the recently created Consumer Financial Protection Bureau ("CFPB") assuming enforcement authority over the FCRA. Prior to the creation of the new federal agency, the Federal Trade Commission had enforced the Act.

Generally, the FCRA governs third-party credit reporting agencies that perform background checks on job applicants and employees on behalf of employers. Under the Act, employers must clearly disclose to the applicant or employee the intent to obtain such a report and to utilize it in making an employment decision. The FCRA provides for additional notice and provision of information to the applicant or employee if an adverse employment action is taken on the basis of the report.

To be in compliance with the FCRA, an employer must certify that it: (1) notified the applicant or employee and got that individual's permission to get a consumer report; (2) complied with all of the FCRA requirements; and (3) will not discriminate against the applicant or employee or otherwise misuse the information, as provided by any applicable federal or state equal opportunity laws or regulations.

Before an employer may reject a job application, reassign or terminate an employee, deny a promotion, or take any other adverse employment action based on information in a consumer report, it must give the applicant or employee: (1) a notice that includes a copy of the consumer report relied upon in making the decision; and (2) a copy of a Summary of Rights Under the Fair Credit Reporting Act.

If an employer takes an adverse action based on information in a consumer report, it must give the applicant or employee a notice of that fact – orally, in writing, or electronically. An adverse action notice tells people about their rights to see information being reported about them and to correct inaccurate information. The notice must include: (1) the name, address, and phone number of the consumer reporting company that supplied the report; (2) a statement that the company that supplied the report did not make the decision to take the unfavorable action and cannot give specific reasons for it; and (3) a notice of the person's right to dispute the accuracy or completeness of any information the consumer reporting company furnished, and to get an additional free report from the company if the person asks for it within 60 days.
Employers who use "investigative reports" – reports based on personal interviews concerning a person's character, general reputation, personal characteristics, and lifestyle – have additional obligations under the FCRA. These obligations include but are not limited to giving written notice that the person who is the subject of the report may request or have requested an investigative consumer report, and giving a statement that the person has a right to request additional disclosures and a summary of the scope and substance of the report. [See 15 U.S.C. section 1681d(a),(b)]. There are also requirements as to the confidentiality and disposal of such investigative reports.

The modifications that must be made by January 1, 2013 reflect relatively minor changes to the mandatory "Summary of Rights" form. This is the form that must be included with a "pre-adverse action" notice, as well as with disclosures for investigative consumer reports based on personal interviews conducted by consumer reporting agencies. A copy of the new notice is available here.