Recent Amendment to the Fair Credit Reporting Act Requires Employers to Update their Background Chec Recent Amendment to the Fair Credit Reporting Act Requires Employers to Update their Background Chec

Recent Amendment to the Fair Credit Reporting Act Requires Employers to Update their Background Check Processes

If an employer procures background checks or credit checks on job applicants or current employees, the federal Fair Credit Reporting Act (FCRA) imposes very specific obligations on the employer. One of those obligations is the requirement to obtain a candidate/employee’s authorization in writing before procuring the report. In addition, employers must give a candidate/employee a pre-adverse action notice before taking any action that  adversely affects the candidate/employee (such as denial of employment, demotion, denial of promotion), if the employer’s action is based in any way on the background check or other consumer report. One component of the pre-adverse action notice requirement is the employer’s obligation to provide a “Summary of Consumer Rights” in the form prescribed by the federal Consumer Financial Protection Bureau (CFPB).
 
The May 24, 2018 Economic Growth, Regulatory Relief, and Consumer Protection Act amended the FCRA by adding content to the Summary of Consumer Rights. The new form must be accompanied by information about the applicant’s/employee’s right to a security freeze on credit reports held by the Nationwide Consumer Reporting Agencies. There is a model Summary of Consumer Rights form prepared by the CFPB here.
 
Because this amendment becomes effective September 21, 2018, all employers who perform background checks on candidates and employees should update their Summary of Consumer Rights forms right away. We also highly recommend a review of your background check process to ensure it complies with the FCRA. We can assist you in preparing the appropriate forms and procedures.
 
For more information, please contact Steve Forry, Michael Blickman, and Isaac Colunga at Ice Miller LLP.

This publication is intended for general information purposes only and does not and is not intended to constitute legal advice. The reader should consult with legal counsel to determine how laws or decisions discussed herein apply to the reader’s specific circumstances. 
 
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