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IBA: New FCRA Background Check Requirements Effective Jan. 1, 2013

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halbert-jeffrey-mug Halbert

By Jeffrey B. Halbert, Stewart & Irwin PC

Employers utilizing consumer reporting agencies for purposes of conducting employee background checks are required to comply with specific requirements of the Fair Credit Reporting Act (“FCRA”). The FCRA provides very broad definitions for what constitutes a “consumer reporting agency,” “consumer report,” and “investigative consumer report.” In order to comply with the FCRA, employers obtaining consumer reports from consumer reporting agencies, must: (i) prior to receipt of a consumer report, make a “clear and conspicuous” written disclosure to the consumer (i.e., prospective employee), in a document that consists “solely” of the disclosure, that a consumer report may be obtained for “employment purposes”; and (ii) the applicant must provide advance written consent for the employer to obtain a consumer report for “employment purposes.”1

The FCRA also imposes additional disclosure requirements on employers obtaining investigative consumer reports (i.e., consumer reports based on personal interviews conducted by a consumer reporting agency, such as in-depth reference checks). The employer must disclose to the applicant or employee that an investigative consumer report may be obtained from a consumer reporting agency. The disclosure must include a statement informing the applicant or employee of his or her right to request additional disclosures of the “nature and scope” of the investigation, as well as the FCRA Summary of Rights. The employer must also certify to the consumer reporting agency that it has a “permissible purpose” for requesting a report and that it (i) has provided the required disclosures to the applicant or employee; (ii) has obtained written authorization from the applicant or employee; (iii) will not use the information contained in the report in violation of any federal or state equal opportunity law of regulation; and (iv) will provide the applicant or employee with a copy of the report and FCRA Summary of Rights in the event that an “adverse action” is taken on the basis of information contained in the report.

If an employer takes an adverse action against the applicant or employee, in whole or in part, based on information contained in the report, the employer must follow the two-step notification process. First, before the employer implements the adverse action against the applicant or employee, it must provide a “pre-adverse action” notice to the individual, which must include a copy of the report and the FCRA Summary of Rights. If after waiting the required time, the employer is prepared to take the adverse action against the applicant or employee, it must then provide an “adverse action” notice to the individual, which must include specific information contained within the statute, including contact information for the applicable consumer reporting agency.

The FCRA allows an applicant or employee to pursue a private cause of action against an employer for “negligently” or “willfully” failing to comply with any of the requirements of the Act relating to the individual. The statute of limitations for FCRA violations require that an action be brought by the earlier of (i) two years after the date of discovery by the plaintiff of the violation; or (ii) five years after the date on which the violation that is the basis of the alleged liability occurred. Available damages vary depending on whether the alleged violation is negligent or willful. An employer who negligently fails to comply with any requirement of the FCRA relating to the individual is liable for (i) actual damages sustained by the individual; and (ii) reasonable attorneys’ fees and costs. Employers who willfully violate the statute are subject to (i) actual damages or statutory damages ranging between $100 and $1,000; (ii) punitive damages; and (iii) attorneys’ fees and costs.

Responsibility for enforcement of the FCRA, for the most part, has been transferred from the Federal Trade Commission (FTC) to the newly created Consumer Financial Protection Bureau (CFPB) as a result of the Dodd-Frank Wall Street Reform and Consumer Protection Act. As such, CFPB now possesses primary rulemaking responsibility for the FCRA and recently issued regulations requiring updates to FCRA notices being utilized for background check purposes. Prior to Jan. 1, 2013, employers must substitute the new FCRA Summary of Rights for those currently being utilized when (i) they enclose the form with the “pre-adverse action” notice; and (ii) provide the form with required disclosures for investigative consumer reports. Specifically, the CFPB has modified the FCRA Summary of Rights, Notice to Users of Consumer Reports of their Obligations under the FCRA and Notice to Furnishers of Information of their Obligations under the FCRA to make clear that the CFPB is the agency from which consumers may obtain information about their rights under the FCRA. The new forms can be found at Appendices K, M, and N to 12 C.F.R. Part 1022 and obtained online at www.ecfr.gov or www.consumerfinance.gov.

Given the intensified focus on background checks by other agencies such as the Equal Employment Opportunity Commission (EEOC) and newly issued state laws in Indiana and other states, it is incumbent upon employers to sufficiently assess their current credit and criminal record screening policies and procedures in order to ensure compliance with applicable laws.•

1Additional, but less stringent, rules apply in the context of investigations into employee misconduct.
 

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  1. First comment on this thread is a fitting final comment on this thread, as that the MCBA never answered Duncan's fine question, and now even Eric Holder agrees that the MCBA was in material error as to the facts: "I don't get it" from Duncan December 1, 2014 5:10 PM "The Grand Jury met for 25 days and heard 70 hours of testimony according to this article and they made a decision that no crime occurred. On what basis does the MCBA conclude that their decision was "unjust"? What special knowledge or evidence does the MCBA have that the Grand Jury hearing this matter was unaware of? The system that we as lawyers are sworn to uphold made a decision that there was insufficient proof that officer committed a crime. How can any of us say we know better what was right than the jury that actually heard all of the the evidence in this case."

  2. wow is this a bunch of bs! i know the facts!

  3. MCBA .... time for a new release about your entire membership (or is it just the alter ego) being "saddened and disappointed" in the failure to lynch a police officer protecting himself in the line of duty. But this time against Eric Holder and the Federal Bureau of Investigation: "WASHINGTON — Justice Department lawyers will recommend that no civil rights charges be brought against the police officer who fatally shot an unarmed teenager in Ferguson, Mo., after an F.B.I. investigation found no evidence to support charges, law enforcement officials said Wednesday." http://www.nytimes.com/2015/01/22/us/justice-department-ferguson-civil-rights-darren-wilson.html?ref=us&_r=0

  4. Dr wail asfour lives 3 hours from the hospital,where if he gets an emergency at least he needs three hours,while even if he is on call he should be in a location where it gives him max 10 minutes to be beside the patient,they get paid double on their on call days ,where look how they handle it,so if the death of the patient occurs on weekend and these doctors still repeat same pattern such issue should be raised,they should be closer to the patient.on other hand if all the death occured on the absence of the Dr and the nurses handle it,the nurses should get trained how to function appearntly they not that good,if the Dr lives 3 hours far from the hospital on his call days he should sleep in the hospital

  5. It's a capital offense...one for you Latin scholars..

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