THE FAIR CREDIT REPORTING ACT AND STAYING COMPLIANT

 

Please understand that all information provided on our website is a courtesy to our customers – both current and prospective - and is not intended as legal advice.  We make all attempts to assist you to have structures in place that will aid you as you handle consumer information, personally identifiable information, consumer disputes, etc.  It is the users responsibility to comply with all local, state, and federal laws in relation to both the use and obtainment of any and all information from Horizon Background Screening.
The following is information on the Fair Credit Reporting Act (FCRA) and the four primary steps to staying compliant.  For more information on the FCRA please go to http://www.ftc.gov/os/statutes/fcrajump.shtm.  Please be aware that the rules and regulations of the FCRA and the Federal Trade Commission apply to all employers, regardless of size, industry, location, etc.
STEP ONE - An Employer must certify to the Consumer Reporting Agency that it will follow the FCRA (FCRA Section 604)

Prior to supplying a Consumer Report, an employer must certify to the Consumer Reporting Agency (CRA), that the employer will follow all the steps set forth in the Fair Credit Reporting Act. These include:

  • The employer will use the information for employment purposes only.

  • The employer will not use the information in violation of any federal or state equal opportunity law.

  • The employer will obtain all the necessary disclosures and consents as discussed below.

  • The employer will give the appropriate notices in the event that an adverse action is taken against an applicant based in whole or in part on the contents of the Consumer Report.

  • That if a special type of consumer report is requested, called an Investigative Consumer Report that the employer will give the additional information required by law.

These requirements are explained further in a document prepared by the Federal Trade Commission entitled, "Notice to Users of Consumer Reports Obligations of Users under the FCRA." The FCRA requires a Consumer Reporting Agency to provide a copy of that document to every employer who requests a report.

STEP TWO - An Employer must obtain a written Release and a separate Disclosure from a job applicant before obtaining a Consumer Report (FCRA Sections 604 and 606) Before obtaining a Consumer Report from a Consumer Reporting Agency, the employer must obtain two separate documents:

  • There must be a clear and conspicuous disclosure that a report may be requested. This must be provided in a "separate document." The purpose is to prevent the disclosure being buried in an employment application.

  • The employer must obtain written consent from the applicant.

The Federal Trade Commission (FTC) has clarified that the release and disclosure can be on the same document, as long as the language does not distract from a clear and conspicuous disclosure that a report is being requested. However, we strongly recommend that you use a separate document, such as our Consent Form.

STEP THREE - If adverse action is intended as a result of a Consumer Report, then the applicant is entitled to certain documents (FCRA Section 604) When an employer receives a Consumer Report, and intends not to hire the applicant based upon the report in any way, then the applicant has certain rights. Before taking the adverse action, the employer must provide the following information to the applicant:

  • A copy of the consumer report

  • The FTC document "A Summary of Your Rights Under the Fair Credit Reporting Act"

Following is a sample letter:

Dear Applicant,

A decision is currently pending concerning your application for employment at (company name). Enclosed for your information is a copy of the consumer report that you authorized in regard to your application for employment, together with a "Summary of Your Rights Under the Fair Credit Reporting Act."

If there is any information that is inaccurate or incomplete, you should contact this office as soon as possible so an employment decision may be completed.

Sincerely,

The purpose of this letter and its attachments is to give an applicant the opportunity to see the report that is being used for adverse actions. If the report is inaccurate or incomplete, the applicant then has the opportunity to contact the Consumer Reporting Agency to dispute or explain what is in the report. Otherwise, applicants may be denied employment without ever knowing they were the victims of inaccurate or incomplete data.

Even if there were other reasons in addition to the Consumer Report for not hiring an applicant, these rights still apply. If the intended decision was based in whole or part on the Consumer Report, the applicant has a right to receive the report. In a situation where the employer feels that they would make an adverse decision anyway, regardless of the report, the employer may still want to follow this procedure for maximum legal protection.

STEP FOUR--Notice must be give to an applicant after an adverse action (FCRA sec. 615)

If after sending out the documents required in Step 3, the employer intends to make the decision final, the employer must take one more step. The employer must send the applicant a Notice of Adverse Action informing the job applicant that the employer has made a final decision, along with another copy of the FTC form "Summary of Your Rights under the Fair Credit Reporting Act." The Notice of Adverse Action must contain certain information. The following is a sample letter that contains the necessary statements:

Dear Applicant,

In reference to your application for employment, we regret to inform you that we are unable to further consider you for employment at this time. Our decision, in part, is the result of information obtained through the Consumer Reporting Agency identified below. The Consumer Reporting Agency did not make the adverse decision, and is unable to explain why the decision was made.

You have the right to obtain within 60 days a free copy of your consumer report from the Consumer Reporting Agency as identified below and from any other consumer reporting agency which complies and maintains files on consumers on a nationwide basis.

You have the right to contact the Consumer Reporting Agency listed below to dispute any information contained in the report that you believe may be inaccurate or incomplete. A copy of your rights under the "Fair Credit Reporting Act" is enclosed, entitled "Summary of Your Rights under the Fair Credit Reporting Act." The agency that conducted your background screening report is:

Horizon Background Screening Services
6175 Hickory Flat Hwy; Suite 110-253
Canton, GA 30115
Phone: 404.556.1349

Many employers find it difficult to believe that Congress intended that an applicant be notified twice, both before an adverse action and after.

However, the law clearly requires two notices. This is also the interpretation of the Federal Trade Commission Staff. The purpose is to give job applicants the maximum opportunity to correct any incomplete or inaccurate reports that could affect their chances of employment. As with any questions or issues regarding compliance, we will gladly assist you as we can.

Additionally, we highly recommend that you review all of your procedures and operations with legal council.
"Notice to Users of Consumer Reports"

"A Summary of Your Rights Under the Fair Credit Reporting Act"