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Employers and Credit
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 increase the legal obligations of
employers who use consumer reports. Congress expanded employer
responsibilities because of concern that inaccurate or incomplete consumer
reports could cause applicants to be denied jobs or cause employees to be denied
promotions unjustly.
The amendments ensure:
(1) that individuals are aware that consumer reports may be used for employment
purposes and agree to such use, and
(2) that individuals are notified promptly if information in a consumer report may
result in a negative employment decision.
What is a Consumer Report?
A consumer report contains information about your personal and credit
characteristics, character, general reputation, and lifestyle. To be covered by the
FCRA, a report must be prepared by a consumer reporting agency (CRA) - a
business that assembles such reports for other businesses.
Employers often do background checks on applicants and get consumer reports
during their employment. Some employers only want an applicant or employee
credit payment records; others want driving records and criminal histories. For
sensitive positions, it’s not unusual for employers to order investigative consumer
reports - reports that include interviews with an applicant’s or employee’s friends,
neighbors, and associates. All of these types of reports are consumer reports if
they are obtained from a CRA.
Applicants are often asked to give references. Whether verifying such references is
covered by the FCRA depends on who does the verification. A reference verified by
the employer is not covered by the Act; a reference verified by an employment or
reference checking agency (or other CRA) is covered. Section 603(o) provides
special procedures for reference checking; otherwise, checking references may
constitute an investigative consumer report subject to additional FCRA
requirements.
Key Provisions of the FCRA Amendments
Written Notice and Authorization.
Before you can get a consumer report for employment purposes, you must notify
the individual in writing - in a document consisting solely of this notice - that a report
may be used. You also must get the person’s written authorization before you ask a
CRA for the report.
Adverse Action Procedures.
If you rely on a consumer report for an "adverse action" - denying a job application,
reassigning or terminating an employee, or denying a promotion - be aware that:
Step 1: Before you take the adverse action, you must give the individual a pre-
adverse action disclosure that includes a copy of the individual’s consumer report
and a copy of "A Summary of Your Rights Under the Fair Credit Reporting Act" - a
document prescribed by the Federal Trade Commission. The CRA that furnishes
the individual’s report will give you the summary of consumer rights.
Step 2: After you’ve taken an adverse action, you must give the individual notice -
orally, in writing, or electronically - that the action has been taken in an adverse
action notice. It must include:
• the name, address, and phone number of the CRA that supplied the report;
• a statement that the CRA that supplied the report did not make the decision to
take the adverse action and cannot give specific reasons for it; and
• a notice of the individual’s right to dispute the accuracy or completeness of any
information the agency furnished, and his or her right to an additional free
consumer report from the agency upon request within 60 days.
Certifications to Consumer Reporting Agencies
Before giving you an individual’s consumer report, the CRA will require you to certify
that you are in compliance with the FCRA and that you will not misuse any
information in the report in violation of federal or state equal employment
opportunity laws or regulations.
In Practice...
CASE 1
You advertise vacancies for cashiers and receive 100 applications. You want just
credit reports on each applicant because you plan to eliminate those with poor
credit histories. What are your obligations?
You can get credit reports - one type of consumer report - if you notify each applicant
in writing that a credit report may be requested and if you receive the applicant’s
written consent. Before you reject an applicant based on credit report information,
you must make a pre-adverse action disclosure that includes a copy of the credit
report and the summary of consumer rights under the FCRA. Once you’ve rejected
an applicant, you must provide an adverse action notice if credit report information
affected your decision.
CASE 2
You are considering a number of your long-term employees for a major promotion.
You want to check their consumer reports to ensure that only responsible
individuals are considered for the position.
What are your obligations?
You cannot get consumer reports unless the employees have been notified that
reports may be obtained and have given their written permission. If the employees
gave you written permission in the past, you need only make sure that the
employees receive or have received a "separate document" notice that reports may
be obtained during the course of their employment - no more notice or permission
is required. If your employees have not received notice and given you permission,
you must notify the employees and get their written permission before you get their
reports.
In each case where information in the report influences your decision to deny
promotion, you must provide the employee with a pre-adverse action disclosure.
The employee also must receive an adverse action notice once you have selected
another individual for the job.
CASE 1
A job applicant gives you the okay to get a consumer report. Although the credit
history is poor and that’s a negative factor, the applicant’s lack of relevant
experience carries more weight in your decision not to hire.
What’s your responsibility?
In any case where information in a consumer report is a factor in your decision -
even if the report information is not a major consideration - you must follow the
procedures mandated by the FCRA. In this case, you would be required to provide
the applicant a pre-adverse action disclosure before you reject his or her
application. When you formally reject the applicant, you would be required to provide
an adverse action notice.
CASE 2
The applicants for a sensitive financial position have authorized you to obtain credit
reports. You reject one applicant, whose credit report shows a debt load that may
be too high for the proposed salary, even though the report shows a good
repayment history. You turn down another, whose credit report shows only one
credit account, because you want someone who has shown more financial
responsibility.
Are you obliged to provide any notices to these applicants?
Both applicants are entitled to a pre-adverse action disclosure and an adverse
action notice. If any information in the credit report influences an adverse decision,
the applicant is entitled to the notices - even when the information isn’t negative.
Non-compliance
There are legal consequences for employers who fail to get an applicant’s
permission before requesting a consumer report or who fail to provide pre-adverse
action disclosures and adverse action notices to unsuccessful job applicants. The
FCRA allows individuals to sue employers for damages in federal court. A person
who successfully sues is entitled to recover court costs and reasonable legal fees.
The law also allows individuals to seek punitive damages for deliberate violations.
In addition, the Federal Trade Commission, other federal agencies, and the states
may sue employers for noncompliance and obtain civil penalties.
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 increase the legal obligations of
employers who use consumer reports. Congress expanded employer
responsibilities because of concern that inaccurate or incomplete consumer
reports could cause applicants to be denied jobs or cause employees to be denied
promotions unjustly.
The amendments ensure:
(1) that individuals are aware that consumer reports may be used for employment
purposes and agree to such use, and
(2) that individuals are notified promptly if information in a consumer report may
result in a negative employment decision.
What is a Consumer Report?
A consumer report contains information about your personal and credit
characteristics, character, general reputation, and lifestyle. To be covered by the
FCRA, a report must be prepared by a consumer reporting agency (CRA) - a
business that assembles such reports for other businesses.
Employers often do background checks on applicants and get consumer reports
during their employment. Some employers only want an applicant or employee
credit payment records; others want driving records and criminal histories. For
sensitive positions, it’s not unusual for employers to order investigative consumer
reports - reports that include interviews with an applicant’s or employee’s friends,
neighbors, and associates. All of these types of reports are consumer reports if
they are obtained from a CRA.
Applicants are often asked to give references. Whether verifying such references is
covered by the FCRA depends on who does the verification. A reference verified by
the employer is not covered by the Act; a reference verified by an employment or
reference checking agency (or other CRA) is covered. Section 603(o) provides
special procedures for reference checking; otherwise, checking references may
constitute an investigative consumer report subject to additional FCRA
requirements.
Key Provisions of the FCRA Amendments
Written Notice and Authorization.
Before you can get a consumer report for employment purposes, you must notify
the individual in writing - in a document consisting solely of this notice - that a report
may be used. You also must get the person’s written authorization before you ask a
CRA for the report.
Adverse Action Procedures.
If you rely on a consumer report for an "adverse action" - denying a job application,
reassigning or terminating an employee, or denying a promotion - be aware that:
Step 1: Before you take the adverse action, you must give the individual a pre-
adverse action disclosure that includes a copy of the individual’s consumer report
and a copy of "A Summary of Your Rights Under the Fair Credit Reporting Act" - a
document prescribed by the Federal Trade Commission. The CRA that furnishes
the individual’s report will give you the summary of consumer rights.
Step 2: After you’ve taken an adverse action, you must give the individual notice -
orally, in writing, or electronically - that the action has been taken in an adverse
action notice. It must include:
• the name, address, and phone number of the CRA that supplied the report;
• a statement that the CRA that supplied the report did not make the decision to
take the adverse action and cannot give specific reasons for it; and
• a notice of the individual’s right to dispute the accuracy or completeness of any
information the agency furnished, and his or her right to an additional free
consumer report from the agency upon request within 60 days.
Certifications to Consumer Reporting Agencies
Before giving you an individual’s consumer report, the CRA will require you to certify
that you are in compliance with the FCRA and that you will not misuse any
information in the report in violation of federal or state equal employment
opportunity laws or regulations.
In Practice...
CASE 1
You advertise vacancies for cashiers and receive 100 applications. You want just
credit reports on each applicant because you plan to eliminate those with poor
credit histories. What are your obligations?
You can get credit reports - one type of consumer report - if you notify each applicant
in writing that a credit report may be requested and if you receive the applicant’s
written consent. Before you reject an applicant based on credit report information,
you must make a pre-adverse action disclosure that includes a copy of the credit
report and the summary of consumer rights under the FCRA. Once you’ve rejected
an applicant, you must provide an adverse action notice if credit report information
affected your decision.
CASE 2
You are considering a number of your long-term employees for a major promotion.
You want to check their consumer reports to ensure that only responsible
individuals are considered for the position.
What are your obligations?
You cannot get consumer reports unless the employees have been notified that
reports may be obtained and have given their written permission. If the employees
gave you written permission in the past, you need only make sure that the
employees receive or have received a "separate document" notice that reports may
be obtained during the course of their employment - no more notice or permission
is required. If your employees have not received notice and given you permission,
you must notify the employees and get their written permission before you get their
reports.
In each case where information in the report influences your decision to deny
promotion, you must provide the employee with a pre-adverse action disclosure.
The employee also must receive an adverse action notice once you have selected
another individual for the job.
CASE 1
A job applicant gives you the okay to get a consumer report. Although the credit
history is poor and that’s a negative factor, the applicant’s lack of relevant
experience carries more weight in your decision not to hire.
What’s your responsibility?
In any case where information in a consumer report is a factor in your decision -
even if the report information is not a major consideration - you must follow the
procedures mandated by the FCRA. In this case, you would be required to provide
the applicant a pre-adverse action disclosure before you reject his or her
application. When you formally reject the applicant, you would be required to provide
an adverse action notice.
CASE 2
The applicants for a sensitive financial position have authorized you to obtain credit
reports. You reject one applicant, whose credit report shows a debt load that may
be too high for the proposed salary, even though the report shows a good
repayment history. You turn down another, whose credit report shows only one
credit account, because you want someone who has shown more financial
responsibility.
Are you obliged to provide any notices to these applicants?
Both applicants are entitled to a pre-adverse action disclosure and an adverse
action notice. If any information in the credit report influences an adverse decision,
the applicant is entitled to the notices - even when the information isn’t negative.
Non-compliance
There are legal consequences for employers who fail to get an applicant’s
permission before requesting a consumer report or who fail to provide pre-adverse
action disclosures and adverse action notices to unsuccessful job applicants. The
FCRA allows individuals to sue employers for damages in federal court. A person
who successfully sues is entitled to recover court costs and reasonable legal fees.
The law also allows individuals to seek punitive damages for deliberate violations.
In addition, the Federal Trade Commission, other federal agencies, and the states
may sue employers for noncompliance and obtain civil penalties.
Employer did you know..?
Employee Assistance Program
When information in a consumer
report influences your decision to
deny a promotion, you must
provide the employee with a
pre-adverse action disclosure.
The employee must also receive
an adverse action notice once
you have selected another
individual for the job.
Not up to date on the facts/law?
Call us 1 888 513 9953
report influences your decision to
deny a promotion, you must
provide the employee with a
pre-adverse action disclosure.
The employee must also receive
an adverse action notice once
you have selected another
individual for the job.
Not up to date on the facts/law?
Call us 1 888 513 9953
Let one of our senior staff
members explain how credit
repair can benefit not just the
employee's but also the company.
NEED MORE INFO?
Let us hold a free educational
seminar for you. Our seminars
and classes are geared towards
the education of your employees;
not the selling of a service or the
promotion of a product.
members explain how credit
repair can benefit not just the
employee's but also the company.
NEED MORE INFO?
Let us hold a free educational
seminar for you. Our seminars
and classes are geared towards
the education of your employees;
not the selling of a service or the
promotion of a product.
South Beach Credit "Securing Your Financial Future"
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