Employers Must Use New FCRA Forms By Jan 1, 2013. Why Wait??

What Is FCRA And How Does This Apply To Your Workplace?

The Fair Credit Reporting Act (FCRA) is a federal law that regulates how consumer (credit) reporting agencies use information.  The FCRA restricts who has access to credit information and how that information can be used.  In addition to applications for credit and housing, consumer information or credit reports are commonly used as part of the backgrounds check for employment. 

Why This Matters?

FCRA requires that an applicant or employee be told if information in his or her credit report was used in whole or in part as a basis of an “adverse action,” i.e., such as denying a job application, reassigning or terminating an employee.  The employer must also give the individual the name, address, and phone number of the agency that provided the information.  Before taking an "adverse action", the employer you must notify the individual with a pre-adverse action letter, which includes a copy of the individual's consumer report and a copy of a document called "A Summary of Your Rights Under the FCRA."

Beginning January 1, 2013, employers will be required to use updated forms as part of their background check process.  The most significant of these forms for employers is entitled “A Summary of Your Rights Under the Fair Credit Reporting Act.” Employers must provide this Summary of Rights to applicants and employees when they (or their background check company) issue a pre-adverse action letter and in certain other situations.

What Happens If You Don’t Comply?

Employers that fail to comply with any of the FCRA’s requirements may be subject to lawsuits brought by applicants or employees.  Negligent failure to comply with the requirements can lead to actual damages and attorneys’ fees.  Willful failure to comply can lead to statutory damages ($100-$1,000 per violation), attorneys’ fees, and punitive damages.

What Can You Do Now?

Since the updated forms are available now, employers should begin using the new FCRA Summary of Rights when providing pre-adverse action letters to applicants or employees as soon as is convenient prior to January 1, 2013.  You can get copies of the new forms here.  

If you have any questions about FCRA or any other workplace issue, contact me or visit my website.