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Amendments to the Fair Credit Reporting Act

On Behalf of | Jan 16, 2013 | Consumer Protection

The Fair Credit Reporting Act (“FCRA”) is the federal law that governs the credit reporting agencies’
conduct on consumer reporting.  As of January 1, 2013 the FCRA underwent amendments concerning the access of arrest and conviction records in employment decisions.  The FCRA imposes requirements on employers who use the credit reporting agencies to obtain reports on potential or existing employees with information regarding background checks, credit checks and previous employment history.

This recent amendment requires more restrictive compliance when compiling information on a prospective or existing employee by requiring the use of a federally mandated form and following a four-step process.  Below is a list of the four steps as well as an explanation of each step that an employer must follow to
comply with the FCRA.

Step One:Employers must provide “certification” to the Credit Reporting Agencies

A credit reporting agency (“CRA”) may provide an employer with a consumer report for employment purposes after the employer provides the proper certification.  Certification is proof that the employer notified the prospective or existing employee that it requested a consumer report for employment purposes in writing.  The employer, in response, must obtain written authorization from the prospective or existing employee to access the report for this permissible purpose.  Should the report contain information that negatively affects its employment decision, the employer must comply with the conditions for taking
adverse action as prescribed by the FCRA.  Lastly, once a consumer report is distributed to a potential or
current employer, the CRA must also provide the employer with copy of the laws mandating the use of consumer reports and the obligations of users pursuant to the FCRA.

Step Two:Employers must notify the employee that the information obtained in the consumer disclosure may be used in making its employment decision

The employer must obtain written permission from the potential or current employee in a direct manner.  Furthermore, if an employer requests an “investigative consumer reports” (i.e., a consumer disclosure where information regarding a person’s character, reputation and personal characteristics is obtained
through interview) on potential or current employees it must also inform the employee that such a report may be obtained. Notice must be provided to the employee in writing and sent by mail or personally delivered and is time sensitive.  The notice must also include a statement of the employee’s rights pursuant to the FCRA as well as the employee’s right to request the nature and purpose of the employer’s request.

Step Three:Employers must provide the employee with proper notice should the information obtained in the consumer report adversely affect its employment decision

After accessing a consumer report, if based on the information reported, an employer makes a decision either not to hire a prospective employee or to terminate the employment of an existing employee, the FCRA requires the employer to provide the employee with a copy of the report and a copy of the employee’s rights under the FCRA before it takes action.  This notice allows the employee to exercise his or her rights under the FCRA and dispute any potentially inaccurate negative information with the CRAs that may have been the cause of not being hired or losing existing employment.

Step Four:Employers must inform the potential or current employee of its intent not to hire or to terminate employment either verbally or in writing

After making the decision not to hire or to terminate employment based on information obtained in a consumer report the employer must provide the name and address of the CRA who provided the report, a statement that it was the employer and not the CRA that made the employment decision and an explanation that the employee has the right to dispute information contained in the report and
request a copy of a report free of charge within 60 days.

When you have problems with your credit report, you have rights,  and we’re here to help.  SmithMarco, P.C. has been protecting consumer rights since 2005.  If you feel that you’re rights have been violated, please contact us for a free case review.