New Limitations on Background Checks –  recent amendments to the Fair Credit Reporting Act.

Do you run a credit history or make any kind of background investigation on job applicants or employees? If so, you will be impacted by recent amendments to the Fair Credit Reporting Act (the Act).

Employers may not use “consumer reports” for employment purposes, as of September 30, 1997, unless certain conditions are satisfied.

A “consumer report” is any kind of communication of information obtained from a “consumer reporting agency” about a person’s

  • Credit history
  • Character
  • General reputation
  • Personal characteristics
  • Mode of living

that is used or expected to be used to determine that person’s eligibility for hire, continued employment, promotion, etc. A “consumer reporting agency” is any entity regularly engaged in assembling or evaluating information on consumers for the purpose of furnishing “consumer reports” to third parties.

Under the new rules, before obtaining a consumer report you must certify to the consumer reporting agency issuing the report:

  • You have given written notice to the consumer of your intentions;
  • You have written authorization from the consumer to obtain the report for employment purposes;
  • You will not use the information in the report in violation of any State or Federal Equal Employment Opportunity law;
  • Before you take any adverse employment action based on the report, you will give the consumer (i) a copy of the report and (ii) a statement of his rights under the Act.Before you take any adverse employment action, you must provide the consumer (your employee or job applicant) with
  • The name, address and telephone number of the consumer reporting agency;
  • A statement that the agency did not make the decision to take the adverse employment action and is not able to provide an explanation for the action;
  • Information on the consumer’s rights to receive a free copy of the report and to dispute the accuracy or completeness of its contents.

If you use “investigative consumer reports” (a consumer report based on in person interviews with people who know the consumer), further restrictions are applicable including detailed additional disclosures to the consumer, specific authorization from the consumer and certification to the credit reporting agency that you have made the required disclosures to the consumer.

Of course, there are civil damages available for negligent non-compliance and punitive damages for willful non-compliance. Obtaining information from a consumer reporting agency under false pretenses will result in criminal liability. If you have used consumer reports as an employment tool, and would like to be sure you are complying with these new legal requirements, we would be pleased to assist.