Effective July 21, 2011, employers who take adverse action against a prospective or current employee based, in whole or part, on information contained in the prospective or current employee’s consumer report will have additional disclosures to make to the affected individual.
Beginning next month, if an employer makes an adverse decision based, even partially, on the information contained in a consumer report, the employer must provide the affected individual with written or electronic disclosure of the following:
- The individual’s credit score that was used by the company
- A range of credit scores possible under the credit scoring model used
- Each of the key factors that adversely affected the individual’s credit score under the credit scoring model used, not to exceed a total number of four (if the number of inquiries made with respect to the credit report is a factor, it is not be counted toward the four)
- The date the credit score was created
- The name of the entity or person that supplied the company with the credit score, or that provided the credit file from which the score was created
These additional requirements are imposed under the Dodd-Frank Wall Street Reform and Consumer Protection Act’s amendments to the Fair Credit Reporting Act (FCRA).
The purpose of the FCRA is to protect consumers by ensuring fairness and accuracy in credit reporting. The Dodd-Frank Act, which provides for various changes to financial regulations, amended Section 615 of the FCRA, which governs the obligations of users of consumer reports. In an employment context, a consumer report is any communication of information by a consumer reporting agency that bears on a prospective or current employee’s “credit worthiness, credit standing, credit capacity, character, general reputation, personal characteristics, or mode of living” and is used or is expected to be used as a factor in considering the individual’s eligibility for employment purposes. See 15 U.S.C. § 1681(d). Section 615(a) is applicable to many employers as it has become common practice for employers to conduct background checks on prospective and current employees. Such screenings generally produce information that falls within the definition of a consumer report.
All of these new requirements are in addition to the existing notice requirements employers must give to job candidates or employees. Some of the current obligations of employers include providing contact information for the consumer reporting agency that provided the consumer report; information about the applicant/employee’s right under the FCRA to obtain a free copy of his/her consumer report from the consumer reporting agency if he/she requests it within 60 days of receiving the notice; and the consumer’s right to dispute the accuracy or completeness of information with the consumer reporting agency.