ARTICLE
12 November 2012

New Forms For FCRA Background Checks Effective January 1, 2013

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Duane Morris LLP

Contributor

Duane Morris LLP, a law firm with more than 800 attorneys in offices across the United States and internationally, is asked by a broad array of clients to provide innovative solutions to today's legal and business challenges.
A relatively new federal agency, the Consumer Financial Protection Bureau ("CFPB"), created as part of the Dodd-Frank Act of 2010, has replaced the Federal Trade Commission ("FTC").
United States Employment and HR

A relatively new federal agency, the Consumer Financial Protection Bureau ("CFPB"), created as part of the Dodd-Frank Act of 2010, has replaced the Federal Trade Commission ("FTC") as the primary rulemaking and enforcement authority for background checking of individuals under the federal Fair Credit Reporting Act ("FCRA"). The CFPB has issued regulations revising the Summary of Consumer Rights form used by employers, as well as two forms used by Consumer Reporting Agencies ("CRA"). The new forms take effect January 1, 2013.

The FCRA regulates employers that use CRAs to conduct background checks for hiring, promotion or other employment-related decisions. Before obtaining a consumer report about an applicant or employee, the employer must (1) provide a disclosure stating that it may request a consumer report and (2) obtain authorization from the individual. Additionally, before taking an adverse employment action based on information contained in a consumer report, the employer must provide the individual with (1) a written notice enclosing a copy of the consumer report and (2) a copy of the Summary of Consumer Rights form. This is commonly known as the "Pre-Adverse Action Notice."

The new Summary of Consumer Rights, available here, replaces FTC contact information with references to the CFPB, and directs consumers to visit the CFPB's website for further information about their rights. No substantive changes have been made in the FCRA background-checking procedures. Therefore, the new Summary of Consumer Rights must be provided as part of the Pre-Adverse Action Notice packet, as explained above. In addition, the Summary of Consumer Rights must be given when disclosing the nature and scope of "investigative consumer reports," which are conducted via personal interviews by a CRA.

Now is a good time for employers to revisit their background-checking procedures and forms to ensure compliance with applicable federal and state laws. In addition to the new federal Summary of Consumer Rights, employers should also consider checking compliance with specific state laws, as many states have passed similar, or more restrictive, background-checking laws. For example, California has its own state Summary of Rights that must accompany the initial disclosure and authorization form, as well as a general prohibition on seeking credit reports unless one of a small number of narrow exceptions applies. Massachusetts has special timing requirements that differ from the FCRA, and New York has specific factors that must be considered.

If you have any questions about this Alert, please contact any of the attorneys in our Employment, Labor, Benefits and Immigration Practice Group or the attorney in the firm with whom you are regularly in contact.

This article is for general information and does not include full legal analysis of the matters presented. It should not be construed or relied upon as legal advice or legal opinion on any specific facts or circumstances. The description of the results of any specific case or transaction contained herein does not mean or suggest that similar results can or could be obtained in any other matter. Each legal matter should be considered to be unique and subject to varying results. The invitation to contact the authors or attorneys in our firm is not a solicitation to provide professional services and should not be construed as a statement as to any availability to perform legal services in any jurisdiction in which such attorney is not permitted to practice.

Duane Morris LLP, a full-service law firm with more than 700 attorneys in 24 offices in the United States and internationally, offers innovative solutions to the legal and business challenges presented by today's evolving global markets. Duane Morris LLP, a full-service law firm with more than 700 attorneys in 24 offices in the United States and internationally, offers innovative solutions to the legal and business challenges presented by today's evolving global markets. The Duane Morris Institute provides training workshops for HR professionals, in-house counsel, benefits administrators and senior managers.

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