What is the Fair Credit Reporting Act (FCRA)?
The Federal Fair Credit Reporting Act (FCRA) was enacted April 25, 1971. The FCRA created the first federal regulation of the consumer reporting industry citing “a need to ensure that consumer
reporting agencies exercise their grave responsibilities with fairness, impartiality and a respect
for the consumer’s right to privacy.”
Is PreHire a Consumer Reporting Agency?
Yes. PreHire Screening Services is a Consumer Reporting Agency (CRA). PreHire supplies
consumer reports to its customers for employment screening purposes. When your company
orders a consumer report from PreHire, it is automatically subject to certain provisions of the FCRA.
What Is a Consumer Report?
A consumer report is defined under the Act as “a written, oral or other communication of any information by a consumer reporting agency bearing on a consumer’s credit worthiness, credit standing, credit capacity, character, general reputation, personal characteristics or mode of living” used in whole or in part as a factor in establishing a consumer’s eligibility for credit, employment, insurance or other benefits.
What Is an Investigative Consumer Report?
Certain provisions of the FCRA also deal specifically with your responsibilities if you order a category of reports called investigative consumer reports. An investigative consumer report is a type of report containing information pertaining to the consumer’s character, general reputation, personal characteristics or mode of living that is derived through personal interviews with friends or associates of the consumer. For example if you order a reference check, then the report will qualify as an Investigative Consumer Report.
Report Content Limitations
The FCRA provides that consumer reports and investigative consumer reports may
not contain adverse information more than seven years old, except that:
- Orders of relief (bankruptcies) may be reported for ten years.
- Convictions may be reported without limitation except in the following states where the time limitation is still seven years: CA, KS, MO, MA, MT, NV, NH, NM, NY and WA.
- There are no limitations on reporting adverse information when a job paying at least $75,000 per year is involved.
When you order consumer reports or investigative consumer reports for pre-employment screening purposes, you must certify the following to PreHire:
- The purpose for requesting the report and use the information only for that purpose.
- That you will comply with the disclosure requirements of the FCRA (including adverse action provisions).
- That the information will not be used to violate any federal or state equal employment laws or regulations.
- That consumer reports or investigative consumer reports will not be ordered for employment purposes including retention or promotion purposes without the consumer’s authorization.
If you order a consumer report for pre-employment screening purposes, pre-notification is required. Any time a consumer report or investigative consumer report is ordered for employment purposes, you must notify the consumer that such a report may be made and will include information as to his/her character, general reputation, personal characteristics and mode of living.
A consumer report notice must:
- Be in writing, mailed or otherwise delivered to the consumer (e.g., notice may be provided via your application form; for employment purposes only, you may not include the notice via your application form because a stand-alone document is required).
- Be issued before the request for a consumer report.
- Provide written authorization before the request of a consumer report.
An investigative consumer report notice must:
- Be in writing, mailed or otherwise delivered to the consumer (e.g., notice may be provided via your application form;
- Be issued not later than three days after the report was requested.
- Include a statement that, upon written request, additional disclosure will be made concerning the complete nature and scope of the investigation (the information must be provided within five days of receiving such a request from a consumer).
- Provide a written summary of the consumer’s rights as prescribed by the Federal Trade Commission.
When you deny employment, either in part or in whole, because of information contained in a consumer report or investigative consumer report received from a consumer reporting agency, you must notify the consumer of that fact and provide him/her with the following:
- Copy of the report
- Description in writing of the consumer’s rights to obtain a free report within 60 days to dispute any inaccuracies with the consumer reporting agency.
- Reporting agency’s name, address and telephone number.
- A statement claiming that the consumer reporting agency did not make the adverse decision and can not provide the reason for the adverse decision.
- Notification to the consumer of the adverse action which can be orally, in writing or electronically delivered.
Several states have passed legislation similar to the FCRA and those provisions covering your responsibilities as a customer are quite similar to those included in the federal law. However, a few states have different pre-notification and post-notification provisions that must be used with consumers in those states. Please check with PreHire or your legal counsel for state statutes that may affect your business.
- Failure to comply with FCRA requirements imposes civil liability which includes:
- An individual who knowingly obtains a report without a permissible purpose or under false pretenses is liable to the consumer for actual damages with a minimum penalty $1,000.
- Any entity who willfully fails to comply with a provision of the FCRA is liable to the
consumer for actual damages. The penalty has a minimum of $100 and a maximum of $1,000.
- Negligent noncompliance of FCRA requirements may result in liability to the consumer of actual damages, costs and attorney’s fees.
- Attorney’s fees are available to the prevailing party in defending motions brought in
bad faith or for harassment purposes.