The Consumer Financial Protection Bureau (Bureau) has taken over rulemaking and enforcement responsibilities for the Fair Credit Reporting Act (FCRA) and has updated an important FCRA form that employers must use when utilizing consumer reports in conducting background investigations of prospective and current employees, including criminal background checks.The FCRA is the federal law that imposes a number of obligations on employers who use reports from consumer reporting agencies (CRAs) to conduct background screenings of potential and current employees. If an employer uses such reports as the basis of an adverse employment action, such as terminating or failing to hire an employee, without complying with the FCRA, the employer is subject to liability under the FCRA.
The Bureau has updated the form entitled, “A Summary of Your Rights Under the Fair Credit Reporting Act” (Summary of Rights) to indicate that it has primary responsibility for the FCRA. Previously, the Federal Trade Commission (FTC) had responsibility for the FCRA. On the new form, the Bureau encourages employees to visit its Web site for further information about their rights.
An employer is required to provide the Summary of Rights to job applicants and current employees before it obtains an investigative consumer report (a report that contains information gathered through personal interviews with people who know the applicant or employee) from a consumer reporting agency. Employers also are required to provide the Summary of Rights with any pre-adverse action notice sent to an employee when the employer plans to rely on the information contained in the background report to make an employment-related decision.
It is important for employers to use the Bureau’s form — doing so allows the employer to raise a defense against a claim of improper disclosure under the FCRA.
By updating the Summary of Rights (as well as other forms used by CRAs), the Bureau has indicated that the FCRA is on its radar. Employers should expect that the Bureau will use its enforcement powers to ensure employer compliance with the FCRA.
Be sure to use the right form! The Bureau announced on November 14, 2012 that the forms it previously issued late last year for use by January 2013 contained typos and other errors. The Bureau recently reissued corrected forms, which can be found here and here. While the forms issued late last year are sufficient for the time being, the Bureau will discontinue use of those forms at some point in 2013, so it is important to make the switch to the proper form as soon as practicable.