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 or

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. If a class action suit or other manner of retribution is possible, count me in. I have email and voicemail from the man. He colluded with opposing counsel, I am certain. My case was damaged so severely it nearly lost me everything and I am still paying dearly.

  2. There's probably a lot of blame that can be cast around for Indiana Tech's abysmal bar passage rate this last February. The folks who decided that Indiana, a state with roughly 16,000 to 18,000 attorneys, needs a fifth law school need to question the motives that drove their support of this project. Others, who have been "strong supporters" of the law school, should likewise ask themselves why they believe this institution should be supported. Is it because it fills some real need in the state? Or is it, instead, nothing more than a resume builder for those who teach there part-time? And others who make excuses for the students' poor performance, especially those who offer nothing more than conspiracy theories to back up their claims--who are they helping? What evidence do they have to support their posturing? Ultimately, though, like most everything in life, whether one succeeds or fails is entirely within one's own hands. At least one student from Indiana Tech proved this when he/she took and passed the February bar. A second Indiana Tech student proved this when they took the bar in another state and passed. As for the remaining 9 who took the bar and didn't pass (apparently, one of the students successfully appealed his/her original score), it's now up to them (and nobody else) to ensure that they pass on their second attempt. These folks should feel no shame; many currently successful practicing attorneys failed the bar exam on their first try. These same attorneys picked themselves up, dusted themselves off, and got back to the rigorous study needed to ensure they would pass on their second go 'round. This is what the Indiana Tech students who didn't pass the first time need to do. Of course, none of this answers such questions as whether Indiana Tech should be accredited by the ABA, whether the school should keep its doors open, or, most importantly, whether it should have even opened its doors in the first place. Those who promoted the idea of a fifth law school in Indiana need to do a lot of soul-searching regarding their decisions. These same people should never be allowed, again, to have a say about the future of legal education in this state or anywhere else. Indiana already has four law schools. That's probably one more than it really needs. But it's more than enough.

  3. This man Steve Hubbard goes on any online post or forum he can find and tries to push his company. He said court reporters would be obsolete a few years ago, yet here we are. How does he have time to search out every single post about court reporters and even spy in private court reporting forums if his company is so successful???? Dude, get a life. And back to what this post was about, I agree that some national firms cause a huge problem.

  4. rensselaer imdiana is doing same thing to children from the judge to attorney and dfs staff they need to be investigated as well

  5. Sex offenders are victims twice, once when they are molested as kids, and again when they repeat the behavior, you never see money spent on helping them do you. That's why this circle continues