A lesser-noticed provision of the Dodd-Frank Wall Street Reform and Consumer Protection Act ("Dodd-Frank") affecting employers is an amendment to Section 615 of the Fair Credit Reporting Act ("FCRA"). It applies to employers that take adverse action against either a prospective or current employee based, in whole or in part, on the individual's consumer credit report. The amendment requires an employer in such cases to make additional disclosures to the individual. There are five new required disclosures as of July 21, 2011:
- That the individual's credit score was used by the employer;
- The range of credit scores under the credit scoring system used;
- The key factors that adversely affect the individual's credit score under the system, but not to exceed four (if however, the number of credit inquiries made is a factor, it is not counted in the four);
- The date the credit score was created; and
- The name of the entity or person that supplied the credit score to the employer or that supplied the credit file that was the basis for the score.
Despite the FCRA's focus on consumer credit matters, it controls employer use of consumer reports from consumer reporting agencies to employers that relate to a prospective or current employee's "creditworthiness, credit standing, credit capacity, character, general reputation, personal characteristics, or mode of living" when the report is actually used or expected to be used as a factor in determining an individual's employment eligibility.
The new Dodd-Frank FCRA-required disclosures are in addition to current employer notice and authorization obligations to applicants and employees when credit or background checks are being sought or relied upon. Because many employers conduct background checks on at least some applicants and current employees, both the new and existing FCRA required disclosures are important to employers. Taken together with the Equal Employment Opportunity Commission's interest in whether credit checks have a discriminatory impact on protected groups under Title VII of the Civil Rights Act of 1964, employers should review their practices regarding credit and background checks and when and why they are being used. Employers should also assure that they are timely making all of the newly-expanded FCRA required disclosures.