Thursday January 29th, 2004

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Employers often do background checks on applicants and request consumer reports during their employment. A consumer report contains information about your personal and credit characteristics, character, general reputation, and lifestyle. Some employers only want an applicant's or employee's credit payment records; others want driving records and criminal histories.

For sensitive positions, it's not unusual for employers to order investigative consumer reports - reports that include interviews with an applicant's or employee's friends, neighbors, and associates. All of these types of reports are consumer reports if they are obtained from a consumer reporting agency (CRA), a business that assembles such reports for other businesses. To be covered by the Fair Credit Reporting Act, a report must be prepared by a CRA .

Written Notice and Authorization

Before you can get a consumer report for employment purposes, you must notify the individual in writing - in a document consisting solely of this notice - that a report may be used. You also must get the person's written authorization before you ask a CRA for the report.

If you rely on a consumer report for an "adverse action" - denying a job application, reassigning or terminating an employee, or denying a promotion- be aware that before you take such action, you must give the individual a pre-adverse action disclosure. This would include a copy of the individual's consumer report and a copy of "A Summary of Your Rights Under the Fair Credit Reporting Act", a document prescribed by the Federal Trade Commission. The CRA that furnishes the individual's report will give you the summary of consumer rights.

After you've taken action, you must give the individual notice - orally, in writing, or electronically - that the action has been taken in an adverse action notice. It must include:

1. the name,
2. address, and
3. phone number of the CRA that supplied the report;
4. a statement that the CRA that supplied the report did not make the decision to take the adverse action and cannot give specific reasons for it; and
5. a notice of the individual's right to dispute the accuracy or completeness of any information the agency furnished, and his or her right to an additional free consumer report from the agency upon request within 60 days.

Non-compliance Certifications to Consumer Reporting Agencies

Before giving you an individual's consumer report, the CRA will require you to certify that you are in compliance with the FCRA and that you will not misuse any information in the report in violation of federal or state equal employment opportunity laws or regulations.

Non-compliance

There are legal consequences for employers who fail to get an applicant's permission before requesting a consumer report or who fail to provide pre-adverse action disclosures and adverse action notices to unsuccessful job applicants. The FCRA allows individuals to sue employers for damages in federal court. A person who successfully sues is entitled to recover court costs and reasonable legal fees. The law also allows individuals to seek punitive damages for deliberate violations. In addition, the Federal Trade Commission, other federal agencies, and the states may sue employers for noncompliance and obtain civil penalties.