Employers will be required to use updated forms as part of their background check process by January 1, 2013, as responsibility for interpreting the federal Fair Credit Reporting Act (FCRA) transfers from the Federal Trade Commission (FTC) to the newly-created Consumer Financial Protection Bureau (CFPB).

The primary change is that consumers should now contact the CFPB to obtain more information about their rights, as opposed to contacting the FTC.

The most noteworthy of these forms for employers is entitled “A Summary of Your Rights Under the Fair Credit Reporting Act.” Employers must provide this Summary of Rights to applicants and employees when they (or their background check company) issue a pre-adverse action letter and in certain other situations.

The second form, “Notice to Users of Consumer Reports: Obligations of Users Under the FCRA,” is a form that consumer reporting and background check agencies must provide to users of their services, such as employers.

Lastly, similar changes were made to the “Notice to Furnishers of Information: Obligations of Furnishers Under the FCRA.” The FCRA requires consumer reporting agencies to provide this notice to providers of information in certain situations such as re-investigations where a consumer has disputed the information.

Why Employers Need to Take Action to Comply with the new FCRA Rule

Due to an employer’s “negligent” or “willful” failure to comply with any of the FCRA’s requirements, they may be subject to lawsuits brought by both applicants and employees. Negligent failure to comply with the requirements can lead to actual damages and attorneys’ fees, while willful failure to comply with requirements can lead to, not only statutory damages ($100-$1,000 per violation), but also to attorneys’ fees, and punitive damages.

It is recommended that employers not wait until the new year to begin using the new FCRA Summary or Rights, but begin to issue them with pre and post adverse action letters as soon as possible before January 1, 2013.

The Consumer Financial Protection Bureau (CFPB) issued corrected model forms on November 14, 2012. Please click here for a link to the corrected forms.

Resources:

• The three new forms that employers are required to use are available here. (Appendices F, G, and H to 16 CFR part 698).
• The website for the new Consumer Financial Protection Bureau is available here.
• To read the full Fair Credit Reporting Act, click here.
• For more information on what employers need to know when using consumer reports, click here.
• Visit this link for sample letters and additional information

View the:

• Summary of Rights Under the Fair Credit Reporting Act
• Notice to Users of Consumer Reports: Obligations of Users Under the FCRA
• Notice to Furnishers of Information: Obligations of Furnishers Under the FCRA

References:

Woods, Stephen R. (19 September 2012).“Employers Will Need to Use New FCRA Forms by January .” Retrieved 27 November 2012 from Ogletree Deakins: http://blog.ogletreedeakins.com/employers-will-need-to-use-new-fcra-forms-by-january-1/

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