Obtaining Consumer Reports Under the Fair Credit Reporting Act (FCRA)
A. Overview of the FCRA
Employers may use consumer reports when they hire new employees and when they evaluate existing employees for promotion, reassignment and retention, as long as they comply with the requirements of the Fair Credit Reporting Act (“FCRA”). The FCRA is designed primarily to protect the privacy of consumer report information and to guarantee that the information supplied by consumer reporting agencies is as accurate as possible. Amendments to the FCRA – which went into effect September 30, 1997—significantly increased the legal obligations of employers who use consumer reports. The FCRA defines a “consumer report” as “any written, oral, or other communication of any information by a consumer reporting agency bearing on a consumer’s credit worthiness, credit standing, credit capacity, character, general reputation, personal characteristics, or mode of living which is used for … employment purposes.” Thus, the term “consumer report” includes checks on credit, criminal, driving and medical histories, as well as education and employment histories. “Investigative consumer reports” are a special type of consumer report in which information about a consumer’s character, general reputation, personal characteristics and mode of living is obtained through personal interviews. Since investigative consumer reports are considered to be more intrusive and less objective in nature, consumers who are the subject of such reports are given additional rights under the FCRA. Outlined below are the procedures your company must follow under the FCRA when it seeks to obtain either a “consumer report” or “an investigative consumer report” for an applicant or existing employee.
B.
Procedure for Obtaining a “Consumer Report”
To comply with the FCRA, your company must take the following steps:
Step 1: Obtain Consent
At the time the applicant completes the employment application, your company must provide a written disclosure that a credit report may be obtained for employment purposes. In addition, your company must obtain written authorization from the applicant. This disclosure and authorization must be a “stand alone” document. It cannot be included as part of the employment application or applicant statement.
Step 2: Complete Certification Form
Your company must certify to the consumer reporting agency that, before it takes any adverse action based on a consumer report, it will provide the applicant with a copy of the report and a summary of his or her rights under the FCRA. The certification must also include a statement that the information being obtained will not be used in violation of any federal or state equal employment opportunity law. You may want to check with the consumer reporting agency your company intends to use as it may require subscribers to use one of its forms. In addition, that reporting agency may only require your company to fill out the certification once, rather than for each applicant.
Step 3: Notify Applicant of Negative Report
If the consumer reporting agency reports disqualifying information, your company must: 1) 2) 3) Notify the applicant BEFORE a final decision is made not to hire; Provide the applicant with a copy of the credit report; and Provide the applicant with a copy of the summary of his rights under the FCRA.
Step 4: Applicant Response
If the applicant does not respond to your company’s notification letter within the specified time frame, the Company can proceed with its decision. If the applicant does respond to the notification letter, your company should consider carefully the information submitted and then make its decision accordingly.
Step 5: Notify Applicant of Adverse Employment Action
If your company elects not to hire the applicant based on information, either in whole or part, contained in the consumer report, it must provide the applicant with the following: 1) 2) 3) 4) Oral or written notice of the adverse decision; The name, address and telephone number, either orally or in writing, of the consumer reporting agency that furnished the report; A statement that the consumer reporting agency did not make the decision to take the adverse action and is unable to provide the applicant with the specific reasons why he was not hired; and An oral or written notice of the applicant’s right to obtain a free copy of the complete consumer report from the reporting agency, if requested within 60 days, as well as information regarding the consumer’s right to dispute the information with the reporting agency.
Step 6: Document Adverse Decisions
For all adverse hiring decisions based, in whole or in part, on information received from a consumer reporting agency, your company should document each step taken and forward the documentation for review by some specified individual who will be responsible for ensuring your company’s compliance with the FCRA.
C.
Procedure for Obtaining an “Investigative Consumer Report”
To comply with the FCRA, your company must take the following steps:
Step 1: Obtain Consent
At the time the applicant completes the employment application, your company must provide a written disclosure that an investigative consumer report may be obtained for employment purposes. This disclosure must clearly state that the investigation will entail personal interviews and that the information gathered will concern the subject’s personal characteristics, reputation, and mode of living. The
disclosure must also include a statement informing the applicant that he or she may make a written request for additional disclosure about the report. If the applicant makes such a request within a reasonable time, the employer must provide a complete written description of the nature and scope of the investigation within five days after the individual’s request was received or the report was first requested, whichever is later. The employer may comply with this requirement by delivering a copy of a blank, standardized form used by the consumer reporting agency to transmit the information. Alternatively, the employer may describe the type of questions asked, the number of people interviewed, and the name and address of the investigating agency. In addition to the disclosure, your company must provide the applicant with a copy of the summary of his rights under the FCRA. Finally, your company must obtain written authorization from the applicant. As with the procedure for obtaining “consumer reports,” the above disclosure and authorization must be a “stand alone” document. It cannot be included as part of the employment application statement.
Step 2: Complete Certification Form
As with the procedure for obtaining “consumer reports,” your company must certify to the consumer reporting agency that, before it takes any adverse action based on an investigative consumer report, it will provide the applicant with a copy of the report and a summary of his or her rights under the FCRA. The certification must also include a statement that the information being obtained will not be used in violation of any federal or state equal employment opportunity law. When requesting an investigative consumer report, however, your company must also certify to the consumer reporting agency that the additional disclosure requirements have been met and that the employer will comply with any further requests for disclosure made by the applicant. You may want to check with the consumer reporting agency your company intends to use as it may require subscribers to use one of its forms. In addition, that reporting agency may only require your company to fill out the certification once, rather than for each applicant.
Steps 3 through 6:
Follow the same procedure as for “consumer reports.”