21 Apr What Employers need to know about using consumer reports
Employers may use consumer reports when they hire new employees and when they evaluate employees for promotion, reassignment, and retention provided they comply with the Fair Credit Reporting Act (sections 604, 606, and 615). A consumer report is any report that contains information about a person’s personal and credit characteristics, character, general reputation, and lifestyle. The report, to be covered by the FCRA, must be prepared by a consumer reporting agency – a business that assembles such reports for other businesses. Many employers do background checks on applicants and obtain consumer reports during their employment. They may ask for credit reports, driving records, and criminal histories. All of these reports are consumer reports if they are obtained from a consumer reporting agency.
Before an employer obtains a consumer report for employment purposes, the employer-to-be must notify the individual in writing and in a document consisting solely of this notice. The employer-to-be must also get the applicant’s written authorization before the employer-to-be asks a credit reporting agency for the report. There are legal consequences for employers who fail to get an applicant’s permission before requesting a consumer report.
Additionally, if the employer relies on a consumer report for an "adverse action" such as denying a job application, reassigning an employee, terminating an employee, or denying a promotion to an employee, the employer MUST give the individual a pre-adverse action disclosure BEFORE taking the adverse action. The employer is also required to include a copy of the consumer report relied upon and a copy of "A Summary of Your RIghts Under the Fair Credit Reporting Act" . The credit reporting agency that furnishes the individual’s report should provide a copy of the summary of consumer rights. After an employer takes an adverse action, the employer must give the individual notice that the action has been taken. The adverse action notice must include (1) the name, address, and phone number of the credit reporting agency that supplied the report; (2) a statement that the credit reporting agency that supplied the report did not make the decision to take the adverse action and cannot give specific reasons for it; and (3) 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. There are legal consequences for employers who fail to provide pre-adverse action disclosures and adverse action notices to unsuccessful job applicants. Not only may the individual sue the employer to recover court costs, reasonable legal fees, punitive damages (for deliberate violations), but the Federal Trade Commission and other federal and state agencies may sue employers for noncompliance and obtain civil penalties.
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