Your Credit & Employment Issue
Your Credit & Employment Issue
Your Credit & Employment Issue
The Fair Credit Reporting Act & Acquiring Employment
Provisions of the Fair Credit Reporting Act (FCRA) (15 U.S.C. 1681 et seq.), which is the federal law governing consumer information, have been amended by the Consumer Credit Reporting Reform Act of 1996 (Pub. L. No. 104-208, the Omnibus Consolidated Appropriations Act for Fiscal year 1997, Title II, Subtitle D, Chapter 1), Section 311 of the Intelligence Authorization for Fiscal Year 1998 (Pub. L. No 105-107), the Consumer Reporting Employment Clarification Act (CRECA) of 1998 (Pub. L. No. 105-347), Section 506 of the Gramm-Leach-Bliley Act (Pub. L. 106-120), Section 358(g) and 505(c) of the Uniting and Strengthening America by Providing Appropriate Tools Required to Intercept and Obstruct Terrorism Act of 2001 (USA PATRIOT Act)(Pub. L. 107-156), and the Fair and Accurate Credit Transaction Act (FACTA) of 2003 (Pub. L. No. 108-159).
Specifically, the FCRA requires employers who use outside agencies to perform credit or other background checks (including criminal, reference, or driving record checks), as defined by CRECA, to comply with comprehensive notice, consent, and disclosure obligations both prior to doing the checks and after the results are reported. The provisions of FCRA, CRECA and FACTA directly affect those cities that use outside agencies to secure information about applicants and employees.
The rules apply to anyone over whom the Federal Trade Commission (FTC) has jurisdiction and who maintains or possesses consumer information for business purposes. It applies to individuals and to both large and small organizations that use consumer reports. This includes consumer reporting companies, lenders, insurers, employers, landlords, government agencies, mortgage brokers, car dealers, attorneys, private investigators, debt collectors, individuals who pull consumer reports on prospective at-home employees, and entities that maintain information in consumer reports as part of their role as a service provider to other organizations covered by the rule.
According to the act (15 U.S.C. 603(d)(1)), the definition of a consumer report includes:
"any written, oral, or other communication of any information by a consumer reporting agency bearing on a consumer's credit worthiness, credit standing, credit capacity, character, general reputation, personal characteristics, or mode of living which is used or expected to be used or collected in whole or in part for the purpose of serving as a factor in establishing the consumer's eligibility for credit or insurance or employment purposes".
Consumer information is defined as any record about an individual that is a consumer report or is derived from a consumer report. However, according to the FACTA amendment, "a consumer report does not include communications made to an employer while investigating suspected employee misconduct relating to employment or employee compliance with applicable laws or with pre-existing written policies of the employer". 15 U.S.C. 603(x)(1)(B)(i)) and 15 U.S.C. 603(x)(1)(B)(ii).
If an applicant applies for employment by mail, telephone, computer, or other similar means, at any time before a consumer report is procured or caused to be procured in connection with that application: (1) the person who procures the consumer report on the applicant for employment purposes shall provide to the applicant, by oral, written, or electronic means, notice that a consumer report may be obtained for employment purposes, and a summary of the consumer's rights under section 615(a)(3); and (2) the applicant shall have consented, orally, in writing, or electronically to the procurement of the report by that person. 15 U.S.C. 604(b)(2)(B).
Once the employer has the consumer report, it may decide to take an action based on the consumer report (or based in part on the consumer report). An adverse action includes a denial of employment or any other decision for employment purposes that adversely affects any current or prospective employee. 15 U.S.C. 603(k)(B). Before taking any adverse employment action against someone based in whole or in part on the consumer report, the employer must provide the affected individual with a pre-adverse action disclosure that includes a copy of the consumer report as well as a written description of that individual's rights under the FCRA. 15 U.S.C. 604(b)(3)(A). In other words, when the employer receives the consumer report, he/she must immediately send a copy of the report and the individual's rights statement to the applicant.
Then, if the employer takes adverse action based upon the subject of the report, the employer must by oral, written or electronic means: (1) provide notice of the adverse action to the affected individual; (2) provide the name, address, and telephone number of the consumer reporting agency that provided the report to the employer (the telephone number provided must be the toll-free number where the individual can reach the agency, if the agency maintains files on consumers on a nationwide basis), along with a statement that the agency did not make the decision to take adverse action and thus cannot tell the applicant or employee the specific reason for the actions; (3) provide notice of the individual's right to obtain a free copy of the report on which the adverse action was based within sixty (60) days of notice of the action; and (4) provide notice of the individual's right to dispute the accuracy or completeness of any information in the report with the consumer reporting agency. 15 U.S.C. 615(a).
If an applicant applies for employment by mail, telephone, computer, or other similar means, and if a person who procured a consumer report on the consumer for employment purposes takes an adverse action on the employment application based in whole or in part on the report, then the person must provide the consumer within three business days of taking such action, an oral, written or electronic notification: (1) that adverse action has been taken based on a consumer report received from a consumer reporting agency; (2) the name, address and telephone number of the consumer reporting agency that furnished the report (including a toll-free telephone number if the agency compiles and maintains files on consumers on a nationwide basis; (3) that the consumer reporting agency did not make the decision to take the adverse action and is unable to provide the consumer the specific reasons why the adverse action was taken; and (4) that the applicant may, upon providing proper identification, request a free copy of a report and may dispute with the consumer reporting agency the accuracy or completeness of any information in a report. 15 U.S.C. 604(b)(3)(B).
An investigative consumer report, which is viewed as a much more intrusive inquiry and which contains information collected from personal interviews with neighbors, friends, or associates of the consumer, requires additional obligations. The act (15 U.S.C. 603(d)(3)(e)) defines an investigative consumer report as:
"a consumer report or portion thereof in which information on a consumer's character, general reputation, personal characteristics, or mode of living is obtained through personal interviews with neighbors, friends, or associates of the consumer reported on or with others with whom he is acquainted or who may have knowledge concerning any such items of information". When facing strong opposition concerning credit items that are being reported on your credit files you would more likely need strong legal representation. We've found such a law firm which we feel offers one of the best inexpensive consumer legal credit dispute service around. You may learn more about the law firm over at www.RapidCreditRepairFirm.com.
If a company wants to use an investigative consumer report, it must disclose to the applicant, in a writing mailed, or otherwise delivered to the applicant, no later than three days after the date on which the report is first requested, that "the investigative consumer report may be obtained" and "inform the employee or applicant that he or she has a right to request additional disclosures of the nature and scope of the investigation" and provide the current or prospective employee with a "summary of the consumer's rights". 15 U.S.C. 606(a)(1). The company also would have to certify to the consumer reporting agency that it "made the appropriate disclosures and will comply with the disclosure on request of nature and scope of the investigation". 15 U.S.C. 606(a)(2). This would not affect investigative reports generated using internal investigators for public safety departments. If a company, however, uses an outside firm to conduct investigative consumer reports, then it must comply.
If the Company decides to reject the applicant based in whole or in part on an investigative consumer report, the company must also provide the applicant with a copy of the report and the summary of rights before taking such action. After taking adverse action, the company must also provide notice to the applicant or employee of the adverse action, provide the name, address and telephone number of the consumer reporting agency that furnished the consumer report on which the adverse action was based and notify the applicant or employee of the right to obtain the consumer reporting agency report. 15 U.S.C. 615(a).
Examples:
You advertise vacancies for cashiers and receive 100 applications. You want credit reports on each applicant because you plan to eliminate those with poor credit histories. What are your obligations?
ANSWER: You can get credit reports if you notify each applicant in writing that a credit report may be requested and if you receive the applicant's written consent. Before you reject an applicant based on credit report information, you must make a pre-adverse action disclosure that includes a copy of the credit report and the summary of consumer rights under the FCRA. Once you've rejected an applicant, you must provide an adverse action notice if credit report information affected your decision.
You are considering a number of your long-term employees for a major promotion. You want to check their consumer reports to ensure that only responsible individuals are considered for the position. What are your obligations?
ANSWER: You cannot get consumer reports unless the employees have been notified that reports may be obtained and have given their written permission. If the employees gave written permission in the past, you need only make sure that the employees receive or have received a "separate document" notice that reports may be obtained during the course of their employment no more notice or permission is required. If employees have not received notice and given permission, you must notify the employees and get their written permission before you get their reports. In each case where information in the report influences your decision to deny promotion, you must provide the employee with a pre-adverse action disclosure. The employee also must receive an adverse action notice once you have selected another individual for the job.
A job applicant gives you the okay to get a consumer report. Although the credit history is poor and that's a negative factor, the applicant's lack of relevant experience carries more weight in your decision not to hire. What's your responsibility?
ANSWER: In any case where information in a consumer report is a factor in your decision even if the report information is not a major consideration you must follow the procedures mandated by the FCRA. In this case, you would be required to provide the applicant a pre-adverse action disclosure before you reject his or her application. When you formally reject the applicant, you would be required to provide an adverse action notice.
(NOTE The Fair and Accurate Credit Transaction Act has since been amended to establish "Red Flag and Identity Theft" provisions. More information about the Red Flag rules can be found in the MTAS publication, "Model Identity Theft Policy and FACTA Compliance" by Josh Jones, MTAS Legal Consultant.)
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