Employers that use third parties to perform background checks on applicants or employees must start using new Fair Credit Reporting Act (FCRA) forms immediately. The new Consumer Financial Protection Bureau, which is responsible for enforcing and interpreting FCRA, has issued revised FCRA forms that employers and consumer reporting agencies are required to use, effective January 1, 2013.
FCRA regulates the means by which employers may obtain and rely upon “consumer reports,” which the statute defines broadly to include “any written, oral, or other communication of any information by a consumer reporting agency bearing on a consumer’s credit worthiness, . . . character, general reputation, personal characteristics, or mode of living” when the information is collected to determine an individual’s eligibility for, among other things, employment. Thus, despite its title, FCRA applies outside the consumer and credit contexts, to employers who use a third party vendor to run background checks on their applicants or employees.
FCRA requires that employers make certain specific disclosures and obtain written consent prior to requesting a consumer report or background check on an applicant or employee. The statute also requires employers to provide individuals with a copy of the information relied upon and a Summary of Consumer Rights form at least five business days before taking an adverse action based on the results of a background check or investigative consumer report.
Although FCRA has not substantively changed, the Summary of Rights and other FCRA forms have been revised to reflect the CFPB’s contact information, among other minor revisions. The new forms are available at www.consumerfinance.gov.
Switching forms is easy enough, but FCRA itself is quite complicated. Now is a perfect time for employers to review their background check procedures and forms to ensure they are compliant with FCRA and state law. If you have questions about FCRA or background checks generally, please contact Katy Rand at krand@pierceatwood.com or (207) 791-1267, or any member of Pierce Atwood LLP’s Employment Practice Group.
