Effective Sept. 21, 2018, employers and background check companies must provide updated Fair Credit Reporting Act (FCRA) disclosures to employees and consumers. Specifically, employers must provide employees either the updated Summary of Consumer Rights or the Summary of Consumer Identity Theft Rights.
Employers can use either the Bureau of Consumer Financial Protection (Bureau) model forms or their own substantially similar forms (see below).
What are an employer’s obligations under FCRA?
When an employer uses a third party credit reporting agency for background check screening of applicants or current employees, FCRA requires employers to provide certain notifications to the applicants and employees. For example, an employer must send the Summary of Consumer Rights with a pre-adverse action notification to an applicant if the employer decides not to hire an applicant based on information contained in a third-party background check. A general overview of employers’ obligations under FCRA is available on the Federal Trade Commission’s website.
Why the change?
In May 2018, Congress passed the Economic Growth, Regulatory Relief, and Consumer Protection Act (Act). The Act requires consumer reporting agencies to provide free national security freezes to consumers and extends the initial fraud alert contained in a consumer’s file from 90 days to one year. The Act also directed the Bureau to update the model form and provide a new form relating to identity theft rights. The Act’s changes are intended to protect victims of identity theft and make it more difficult for identity thieves to open unauthorized accounts.
Where can employers get the new forms?
Employers can access the new forms on the Bureau’s website and at the links below:
What are the consequences for employers who do not use the proper forms?
Employees, applicants and consumers can pursue claims against employers for failure to provide the correct notifications during the background check process. Such claims are often filed as class actions and can lead to significant financial exposure. Employers should consult with legal counsel to ensure compliance with their obligations under FCRA.