Employers using third party providers for consumer reports and background checks on employees and applicants have a new law to be concerned with that was effective January 1, 2013. Under the 2012 law, background checks are regulated under the Fair Credit and Reporting Act (FCRA). Pursuant to this Act, when an employer seeks to take an adverse action against an individual based on a background check performed by a third-party, the employer must first provide the individual with a copy of the background check and a copy of the Summary of Rights under the FCRA. This Summary must now be revised.
Under former law, the Federal Trade Commission administered the FCRA. New federal legislation moves this responsibility from the Federal Trade Commission to the somewhat-newly formed Consumer Financial Protection Board. As a result, the Consumer Financial Protection Board has a revised form that employers should use to advise consumers of their rights with respect to background checks. The biggest change on the form reflects the change in agencies. The revised form can be found at Appendix K of Title 12 CFR Part 1022. The form is expected to be available on the Board’s website: www.consumerfinance.gov
After taking an adverse action against an employee or applicant based on a third-party background check, the employer must provide the individual with the following:
- notice of the adverse action taken in whole or in part by the background check;
- the name, address and toll-free telephone number of the third-party vendor that conducted the background check;
- a written statement that the third-party vendor did not make the adverse action and is unable to provide the individual with specific reasons why the adverse action was taken, and;
- notice of the individual’s right to obtain a free copy of the consumer report within 60 days, and to dispute any information in the report.