Title X of the Dodd-Frank Wall Street Reform and Consumer Protection Act of 2010 (Dodd-Frank Act) established the Consumer Financial Protection Bureau (CFPB), and the responsibility for interpreting and enforcing the Fair Credit Reporting Act (FCRA) was transferred to the CFPB. Although the CFPB began most activities on July 21, 2011, the CFPB just recently issued a new form for users of consumer reports to reflect the change in authority. Employers must now provide this new form when considering consumer reports in employment decisions (available here).
Although the form does not reflect a substantive change, employers should use this opportunity to review their compliance obligations under the FCRA. The FCRA applies to “consumer reports,” which are defined as any communication from a consumer reporting agency about an individual which is used in whole or in part as a factor in establishing eligibility for employment. A good summary of employer obligations under the FCRA is here (Appendix N).
In summary, before an employer requests a consumer report, it must:
1. Notify the applicant or employee that it may use the information in his/her consumer report for decisions related to employment. This notice must be in a stand-alone written document. The notice cannot be included in an employment application.
2. Obtain written permission from the applicant or employee to obtain the consumer report. This permission may be contained in the same document that is used to notify the applicant or employee that the employer will get a consumer report. If an employer wants the authorization to allow it to receive consumer reports throughout an employee’s employment, the written authorization must state this clearly and conspicuously.
3. Give the company that will provide the consumer report a written certification that the employer: (1) notified the applicant or employee and obtained their permission to get a consumer report, as required by §604(b) (2) of the FCRA; (2) will give the applicant or employee a copy of the consumer report and a summary of his/her rights under the FCRA before taking adverse action based on the contents of the consumer report, as required by §604(b)(3) of the FCRA; and (3) will not discriminate against the applicant or employee or otherwise misuse the information in the consumer report, as provided by any applicable federal or state equal opportunity laws or regulations.
After receiving the consumer report, if the employer may take adverse action based on the contents of the report, before actually taking the adverse action, the employer must:
1. Give the applicant or employee notice that includes a copy of the consumer report; and
2. Give the applicant or employee a copy of the summary of rights under the Fair Credit Reporting Agency.