Updated Fair Credit Reporting Act – What Does That Mean For Employers Who Perform Background Checks?

Contributed by Heather Bailey

Not too much.  However, effective July 2011 pursuant to the Dodd-Frank Wall Street Reform and Consumer Protection Act, there is a new sheriff in town and its name is the Consumer Financial Protection Bureau, which will now have the rulemaking and enforcement powers over the FCRA instead of the Federal Trade Commission. 

Effective January 1, 2013, the Bureau implemented an interim FCRA rule.  The good news is, there were no substantive changes in the way employers notify applicants and employees about background checks (i.e., the consent form, pre-adverse action notice, and post-adverse action notices if any such actions are taken).   The only change employers need to worry themselves with is the new “Summary of Your Rights Under the Fair Credit Reporting Act” notice that is given to applicable applicants and employees. The revised notice can be found at http://www.gpo.gov/fdsys/pkg/FR-2012-11-14/pdf/2012-27581.pdf, page 67748 (or page 5 of the actual document).

The only other significant change for employers is they will start receiving a “Notice to Users of Consumer Reports of their Obligations” from their vendors who perform the background checks as this is now required of them.  Be on the look-out for future updates to this existing law by the Consumer Financial Protection Bureau as it does not seem like it is done with its new authority.

If you do background checks on applicants and/or employees for any reason and you do not currently have a system in place for properly getting consent or notifying employees appropriately under the requirements of the FCRA, it is imperative you speak with counsel immediately to institute a practice for compliance.