Proposed Amendments to Fair Credit Reporting Act

by McGuireWoods LLP
Contact

Two new bills affecting credit reporting and the use of credit reports for employment purposes are working their way through Congress. If passed, the bills would amend the Fair Credit Reporting Act (FCRA). The first, The Credit Access and Inclusion Act of 2015, H.R. 4172, would allow for increased reporting of customer payment information by companies in the telecommunications and utility industries, with an eye toward helping low-income consumers establish positive credit. The second, the Equal Employment for All Act of 2015, H.R. 3524, would prohibit most employers from using credit reports as a factor in evaluating consumers for employment.

The Credit Access and Inclusion Act – H.R. 4172

H.R. 4172 was introduced in December 2015 with bipartisan support. The bill would make it clear that utility and telecommunication companies may report positive payment information about their customers to credit reporting agencies. This would allow individuals who have little or no traditional credit history but who regularly pay their utility and telecommunication bills on time to begin building positive credit scores.

The bill states: “[n]otwithstanding any other provision of law, a person ... may furnish to a consumer reporting agency information relating to the performance of a consumer in making payments ... pursuant to a contract for a utility or telecommunications service.” The bill also prohibits energy utilities from reporting as late those consumers who are making payments pursuant to an agreed-upon payment plan and who are meeting the obligations of the payment plan.

Furnishing all data about a consumer is referred to as “full-file reporting.” Ordinarily, utility and telecommunication companies report only negative information to consumer reporting agencies, such as missed payments, defaults, and accounts in collections. One reason for this is uncertainty over whether such companies are permitted to report positive payment information to consumer reporting agencies. Regulatory bodies have sent mixed messages on what type of reporting is permitted, and several states have privacy laws that expressly prohibit the furnishing of payment information from utility customers.

The proposed legislation would affirmatively allow utility and telecommunication companies to report positive payment information for their customers. The bill also would supersede any contrary state laws, providing clarity to companies about the breadth of their reporting. Most of the major consumer reporting agencies have offered their support for the bill, and a companion bill has been introduced in the Senate.

If the bill is passed and goes into effect, utility and telecommunication companies will want to reevaluate their procedures for reporting consumer payment information to consumer reporting agencies. Although the bill does not require companies to begin “full-file reporting,” it does place new limits on reporting information about consumers making payments pursuant to a payment plan. Companies may also want to ensure that they have a good working relationship with the consumer reporting agencies to which they provide information.

Equal Employment for All Act of 2015 – H.R. 3524

H.R. 3524 would amend the FCRA to prohibit most employers from using consumer credit reports on prospective and current employees for the purpose of making adverse employment decisions. The bill tracks laws that have been passed in roughly a dozen states that impose limitations on the use of credit information as a factor in employment decisions.

Specifically, the bill would prohibit employers from using a consumer report that contains information bearing “on the consumer’s creditworthiness, credit standing, or credit capacity” as a factor in making adverse employment decisions unless the consumer is applying for a position that requires access to classified information or when otherwise required by law. In all other circumstances, credit information would be off-limits to employers. The FCRA defines adverse employment decisions broadly, covering decisions to hire, terminate, and deny advancement, so the limitation would apply to the vast majority of employment decisions.

Currently, the FCRA allows employers to use credit information when evaluating candidates for employment, but imposes detailed disclosure and notice requirements. Credit reports are a subset of the broader family of consumer reports, which can include criminal history, personal information, and any other information that bears on a consumer’s “mode of living.” The bill does not impact consumer reports generally, focusing only on those containing credit information.

If passed, the bill would extend even further than many of the recently enacted state laws, which carve out exceptions for financial institution employers or are limited to public employees. The only limitations in the bill are for employees who will be handling classified information or who are required by law to have their credit checked for their positions. These will apply to only a very narrow segment of the population.

It remains to be seen whether such a sweeping change to the status quo will garner much support. Nevertheless, it is important for employers to be aware of the many requirements imposed on them by the FCRA and state laws with respect to using background checks for employment purposes. Numerous state laws impose limitations on the use of credit reports, as well as unique notice and disclosure provisions that employers must adhere to before obtaining all background checks. Cases brought under these laws are often ripe for class certification, and the FCRA and many state laws impose punitive statutory damages for even technical violations. These factors make it doubly important for employers to be aware of any changes in the legal landscape regarding the use of background checks for employment purposes.

DISCLAIMER: Because of the generality of this update, the information provided herein may not be applicable in all situations and should not be acted upon without specific legal advice based on particular situations.

© McGuireWoods LLP | Attorney Advertising

Written by:

McGuireWoods LLP
Contact
more
less

McGuireWoods LLP on:

Readers' Choice 2017
Reporters on Deadline

"My best business intelligence, in one easy email…"

Your first step to building a free, personalized, morning email brief covering pertinent authors and topics on JD Supra:
Sign up using*

Already signed up? Log in here

*By using the service, you signify your acceptance of JD Supra's Privacy Policy.
Custom Email Digest
Privacy Policy (Updated: October 8, 2015):
hide

JD Supra provides users with access to its legal industry publishing services (the "Service") through its website (the "Website") as well as through other sources. Our policies with regard to data collection and use of personal information of users of the Service, regardless of the manner in which users access the Service, and visitors to the Website are set forth in this statement ("Policy"). By using the Service, you signify your acceptance of this Policy.

Information Collection and Use by JD Supra

JD Supra collects users' names, companies, titles, e-mail address and industry. JD Supra also tracks the pages that users visit, logs IP addresses and aggregates non-personally identifiable user data and browser type. This data is gathered using cookies and other technologies.

The information and data collected is used to authenticate users and to send notifications relating to the Service, including email alerts to which users have subscribed; to manage the Service and Website, to improve the Service and to customize the user's experience. This information is also provided to the authors of the content to give them insight into their readership and help them to improve their content, so that it is most useful for our users.

JD Supra does not sell, rent or otherwise provide your details to third parties, other than to the authors of the content on JD Supra.

If you prefer not to enable cookies, you may change your browser settings to disable cookies; however, please note that rejecting cookies while visiting the Website may result in certain parts of the Website not operating correctly or as efficiently as if cookies were allowed.

Email Choice/Opt-out

Users who opt in to receive emails may choose to no longer receive e-mail updates and newsletters by selecting the "opt-out of future email" option in the email they receive from JD Supra or in their JD Supra account management screen.

Security

JD Supra takes reasonable precautions to insure that user information is kept private. We restrict access to user information to those individuals who reasonably need access to perform their job functions, such as our third party email service, customer service personnel and technical staff. However, please note that no method of transmitting or storing data is completely secure and we cannot guarantee the security of user information. Unauthorized entry or use, hardware or software failure, and other factors may compromise the security of user information at any time.

If you have reason to believe that your interaction with us is no longer secure, you must immediately notify us of the problem by contacting us at info@jdsupra.com. In the unlikely event that we believe that the security of your user information in our possession or control may have been compromised, we may seek to notify you of that development and, if so, will endeavor to do so as promptly as practicable under the circumstances.

Sharing and Disclosure of Information JD Supra Collects

Except as otherwise described in this privacy statement, JD Supra will not disclose personal information to any third party unless we believe that disclosure is necessary to: (1) comply with applicable laws; (2) respond to governmental inquiries or requests; (3) comply with valid legal process; (4) protect the rights, privacy, safety or property of JD Supra, users of the Service, Website visitors or the public; (5) permit us to pursue available remedies or limit the damages that we may sustain; and (6) enforce our Terms & Conditions of Use.

In the event there is a change in the corporate structure of JD Supra such as, but not limited to, merger, consolidation, sale, liquidation or transfer of substantial assets, JD Supra may, in its sole discretion, transfer, sell or assign information collected on and through the Service to one or more affiliated or unaffiliated third parties.

Links to Other Websites

This Website and the Service may contain links to other websites. The operator of such other websites may collect information about you, including through cookies or other technologies. If you are using the Service through the Website and link to another site, you will leave the Website and this Policy will not apply to your use of and activity on those other sites. We encourage you to read the legal notices posted on those sites, including their privacy policies. We shall have no responsibility or liability for your visitation to, and the data collection and use practices of, such other sites. This Policy applies solely to the information collected in connection with your use of this Website and does not apply to any practices conducted offline or in connection with any other websites.

Changes in Our Privacy Policy

We reserve the right to change this Policy at any time. Please refer to the date at the top of this page to determine when this Policy was last revised. Any changes to our privacy policy will become effective upon posting of the revised policy on the Website. By continuing to use the Service or Website following such changes, you will be deemed to have agreed to such changes. If you do not agree with the terms of this Policy, as it may be amended from time to time, in whole or part, please do not continue using the Service or the Website.

Contacting JD Supra

If you have any questions about this privacy statement, the practices of this site, your dealings with this Web site, or if you would like to change any of the information you have provided to us, please contact us at: info@jdsupra.com.

- hide
*With LinkedIn, you don't need to create a separate login to manage your free JD Supra account, and we can make suggestions based on your needs and interests. We will not post anything on LinkedIn in your name. Or, sign up using your email address.