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Effective January 1, 2013, employers must revise Summary of
Rights forms they provide to prospective and current employees as
required under the Fair Credit Reporting Act
("FCRA").
The FCRA is a federal law which applies whenever a covered
employer seeks information from a "consumer reporting
agency" regarding an individual's credit, character,
general reputation, personal characteristics, or mode of living. A
"consumer reporting agency" is defined quite broadly
under the FCRA, resulting in an employer being subject to the FCRA
simply by using a third-party vendor to conduct background checks
on any of its applicants/employees.
Pursuant to the FCRA, an employer is required to provide a
disclosure and obtain written authorization from any
applicant/employee prior to conducting a background check. Should
the employer seek to take an "adverse action" against the
applicant/employee based on the background check — which,
for purposes of the FCRA is defined as a denial of employment or
any other decision that adversely impacts the applicant/employee
(i.e., failure to hire, transfer, termination) — the
employer must first provide the applicant/employee a copy of the
background check and a Summary of Your Rights under the FCRA
("Summary of Rights") form under the FCRA. It is this
Summary of Rights form that employers must revise prior to January
1, 2013.
With President Obama's signing of the Consumer Protection
Act of 2010 (signed into law on July 21, 2010) enforcement powers
over the FCRA were transferred from the Federal Trade Commission
(FTC) to a newly created Consumer Financial Protection Bureau
(CFPB). The CFPB has since issued regulations requiring employers
to revise their Summary of Rights forms effective January 1. 2013
to reflect that information about consumers rights under the FCRA
can now be obtained from the CFPB instead of the FTC.
Other notice provisions under the FCRA remain the same. After
taking adverse action against an applicant/employee based on a
background check, the employer must provide the applicant/employee
with notice of the adverse action, as well as the name, address and
toll-free telephone number of the third-party vendor that conducted
the background check, and a written statement that the third-party
vendor did not make the decision to take the adverse action and is
unable to provide the applicant/employee with specific reasons as
to why the adverse action was taken. The employer must also provide
the applicant/employee with notice of his/her rights to obtain a
free copy of the consumer report within sixty days and to dispute
the accuracy or completeness of any information contained in the
report.
Further, while the FTC no longer will have primary statutory
authority to issue interpretive guidance under the FCRA, the agency
on July 20, 2011 issued a Staff Report entitled "Forty Years
of Experience with the Fair Credit Reporting Act: An FTC Staff
Report and Summary of Interpretations" which compiles and
updates the agency's prior guidance under the FCRA and provides
a section-by-section summary of the agency's interpretations of
the Act. The FTC also has withdrawn its 1990 Commentary on the
FCRA, which the agency admits had become obsolete as a result of
statutory amendments expanding the FCRA in the intervening years. A
copy of the FTC's new Staff Report can be found on the
FTC's website at http://www.ftc.gov/os/2011/07/110720fcrareport.pdf.
The copy of the new Summary of Rights form which employers are
required to use effective January 1, 2013 can be downloaded from
the CFPB's website at http://ecfr.gpoaccess.gov/graphics/pdfs/er21dell.019.pdf.
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