Under a rule recently issued by the Federal Trade Commission (FTC), the Fair Credit Reporting Act (FCRA) will now impose greater burdens on employers who furnish employment-related information, effective July 1, 2010. Although a “furnisher” is typically thought of as a bank or credit card company that provides credit-related information about a consumer to one of the three major credit bureaus, employers may be considered “furnishers” in certain circumstances. Because the FTC recently determined that unemployment processing and reference checking companies, such as TALX, are consumer reporting agencies, employers who provide payroll or other employee-related information to third parties in connection with services such as unemployment processing and/or reference checking will be considered “furnishers” within the meaning of the FCRA—and, therefore, subject to its regulations.
The final rule requires employer “furnishers” to implement and maintain policies/procedures designed to ensure the “accuracy and integrity” of information provided to those third-party entities. The “accuracy and integrity rules” within the new regulations require data furnishers to “establish and implement reasonable written policies and procedures regarding the accuracy and integrity of the information relating to consumers that it furnishes to a consumer reporting agency.”
The term “accuracy” is defined as information that a furnisher provides to a consumer reporting agency about an account or other relationship, such as employment, that correctly:
- reflects the terms of the relationship with the individual (e.g., the terms of the employment relationship);
- reflects the individual’s performance with respect to the relationship; and
- identifies the appropriate individual.
The term “integrity” is defined as information that a furnisher provides to a consumer reporting agency about an account or other relationship that correctly:
- is substantiated by the data furnisher’s records at the time it is furnished;
- is furnished in a form and manner that is designed to minimize the likelihood that the information may be incorrectly reflected in a report about the individual;
- includes any information in the furnisher’s possession, the absence of which would likely be materially misleading in evaluating the individual’s character, general reputation, personal characteristics or mode of living.
The final rule also requires employers to investigate “direct disputes” from a current or former employee regarding the accuracy of information that the employer provided to a consumer reporting agency—e.g., an employee’s work history, positions held, compensation, and reason for termination. The consumer is required to submit a dispute notice to the employer at: (1) the employer’s address indicated by the employer on the consumer report; or (2) at a location clearly and conspicuously identified by the employer for submitting direct disputes. The dispute notice must include sufficient information to identify the relationship, the information in dispute with a description of the inaccuracy, and all supporting information reasonably required to substantiate the dispute.
Once the employer receives notice of a dispute, the employer must conduct a reasonable investigation and must, in most circumstances, conclude that investigation and report the outcome to the employee within 30 days. If the employer finds that inaccurate information was provided to the consumer reporting agency, the employer must promptly notify the agency and provide the correct information.
Employers are not required to investigate direct disputes that are considered “frivolous or irrelevant,” such as where the employee fails to provide sufficient information to the employer to enable it to investigate. However, the employer must notify the employee within five (5) business days after making a determination that the direct dispute is frivolous or irrelevant, and that notice must include the reasons for the employer’s determination and must identify any information necessary to investigate the dispute.