Employers who do credit checks on job applicants should be aware of new forms published by the Consumer Financial Protection Board (CFPB) that must be used prior to pulling a credit report on an applicant. As part of the Dodd–Frank Wall Street Reform and Consumer Protection Act of 2011, the CFPB is now the agency that enforces the terms of the Fair Credit Reporting Act (FCRA). Prior to Dodd-Frank, the Federal Trade Commission was responsible for FCRA compliance. As of January 1, 2013, employers are being required to use the updated FCRA forms.
Specifically, the forms that have been updated and must be used going forward are the “Summary of Your Rights Under the Fair Credit Reporting Act,” the “Notice to Users of Consumer Reports of their Obligations under the FCRA” and the “Notice to Furnishers of Information of their Obligation under the FCRA.” All three of these forms can be found as Appendices K, M and N of 12 C.F.R. Part 1022.
These forms must be used to comply with the terms of the FCRA whenever an employer obtains a “consumer report” from a consumer reporting agency (CRA). They concern the comprehensive procedural requirements, both prior to performing a background check and after the report is issued by the CRA. These reports include credit reports, employment history reports, motor vehicle records as well as criminal background checks.
This is also an opportune time for employers to review their selection and hiring processes to ensure that they comply with the FCRA. As the public and government at all levels takes a stronger focus on consumer rights and protections, employers who are not in compliance with all FCRA rules run the risk of exposure. Examples of issues that employers should be monitoring are whether job candidates are being asked for written consent before consumer reports are pulled, whether applicants are being given copies of consumer reports prior to any adverse action and whether document retention policies are adjusted to make sure that consumer reports are being destroyed in the manner dictated by the FCRA.
Even though the form updates are relatively minor, ensuring that employers are using the correct forms and ensuring that they are fully compliant with the FCRA in every other way will help avoid the potential for liability for FCRA violations. With the increasing push for consumer protections coming out of Washington D.C. and state capitols across the country, an ounce of prevention now may be worth much more than a pound of cure in the future.