ILNews

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

Back to TopCommentsE-mailPrintBookmark and Share

 

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.
 

ADVERTISEMENT

Post a comment to this story

COMMENTS POLICY
We reserve the right to remove any post that we feel is obscene, profane, vulgar, racist, sexually explicit, abusive, or hateful.
 
You are legally responsible for what you post and your anonymity is not guaranteed.
 
Posts that insult, defame, threaten, harass or abuse other readers or people mentioned in Indiana Lawyer editorial content are also subject to removal. Please respect the privacy of individuals and refrain from posting personal information.
 
No solicitations, spamming or advertisements are allowed. Readers may post links to other informational websites that are relevant to the topic at hand, but please do not link to objectionable material.
 
We may remove messages that are unrelated to the topic, encourage illegal activity, use all capital letters or are unreadable.
 

Messages that are flagged by readers as objectionable will be reviewed and may or may not be removed. Please do not flag a post simply because you disagree with it.

Sponsored by
ADVERTISEMENT
Subscribe to Indiana Lawyer
  1. Other than a complete lack of any verifiable and valid historical citations to back your wild context-free accusations, you also forget to allege "ate Native American children, ate slave children, ate their own children, and often did it all while using salad forks rather than dinner forks." (gasp)

  2. "So we broke with England for the right to "off" our preborn progeny at will, and allow the processing plant doing the dirty deeds (dirt cheap) to profit on the marketing of those "products of conception." I was completely maleducated on our nation's founding, it would seem. (But I know the ACLU is hard at work to remedy that, too.)" Well, you know, we're just following in the footsteps of our founders who raped women, raped slaves, raped children, maimed immigrants, sold children, stole property, broke promises, broke apart families, killed natives... You know, good God fearing down home Christian folk! :/

  3. Who gives a rats behind about all the fluffy ranking nonsense. What students having to pay off debt need to know is that all schools aren't created equal and students from many schools don't have a snowball's chance of getting a decent paying job straight out of law school. Their lowly ranked lawschool won't tell them that though. When schools start honestly (accurately) reporting *those numbers, things will get interesting real quick, and the looks on student's faces will be priceless!

  4. Whilst it may be true that Judges and Justices enjoy such freedom of time and effort, it certainly does not hold true for the average working person. To say that one must 1) take a day or a half day off work every 3 months, 2) gather a list of information including recent photographs, and 3) set up a time that is convenient for the local sheriff or other such office to complete the registry is more than a bit near-sighted. This may be procedural, and hence, in the near-sighted minds of the court, not 'punishment,' but it is in fact 'punishment.' The local sheriffs probably feel a little punished too by the overwork. Registries serve to punish the offender whilst simultaneously providing the public at large with a false sense of security. The false sense of security is dangerous to the public who may not exercise due diligence by thinking there are no offenders in their locale. In fact, the registry only informs them of those who have been convicted.

  5. Unfortunately, the court doesn't understand the difference between ebidta and adjusted ebidta as they clearly got the ruling wrong based on their misunderstanding

ADVERTISEMENT