FTC Reminds Users of Consumer Reports of their Obligations Under the FCRA

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Written By ESR News Blog Editor Thomas Ahearn

A Federal Trade Commission (FTC) blog entitled ‘Background checks? Don’t double-dip.’ reminds users who receive information from Consumer Reporting Agencies (CRAs) that compile consumer reports containing the employment, income, and criminal history of consumers that they must comply with the federal Fair Credit Reporting Act (FCRA) and not “double-dip” and get a report for one purpose but use if for a different purpose.

According to the blog: Need to verify an applicant’s employment or income history? Checking to see if a candidate has a criminal history or civil judgments? If you get information from a company that compiles it so you can make eligibility determinations, you must comply with the Fair Credit Reporting Act (FCRA). That means no double-dipping. If you get a consumer report for one purpose, don’t use it for a different purpose.

The FCRA applies when consumer reports are used to determine things like eligibility for credit, insurance, housing, employment, or admission to an educational institution. The FCRA also requires CRAs to give users of consumer reports a document entitled ‘NOTICE TO USERS OF CONSUMER REPORTS: OBLIGATIONS OF USERS UNDER THE FCRA’ to inform them of their obligations under the FCRA.

The blog explains how users of consumer reports – a technical term for background checks – must certify to the CRA the purpose for which the report will be used and use the report only for that purpose. This is done because the FCRA requires CRAs to inform consumers about who has obtained reports on them and helps consumers keep track of users. Other FCRA principles users of consumer reports should keep in mind include:

  • If users make an “adverse” or negative decision about a person based on a consumer report, they must provide that person with an “adverse action notice” that includes: the name, address, and phone number of the CRA that prepared the report, a statement that the CRA did not make the decision and is not able to provide the reasons for the adverse action, and that the person has a right to receive a free copy of the report within 60 days and dispute inaccurate information.
  • The adverse action notice may be provided orally, electronically, or in writing, with the written version being preferred since it provides proof of compliance. The CRA that provides users with the consumer reports may have a sample adverse action notice.
  • Once users of consumer reports are finished and no longer need the report they must securely dispose of it by following the FTC’s Disposal Rule.

The blog also reminds users of consumer reports that other federal laws besides the FCRA, as well as other state or local laws, may apply to the use of consumer reports. The complete blog ‘Background checks? Don’t double-dip.’ posted on the business blog section of the FTC website on February 16, 2017, is available at www.ftc.gov/news-events/blogs/business-blog/2017/02/background-checks-dont-double-dip.

Created in 1914, Federal Trade Commission (FTC) is the only federal agency with both consumer protection and competition jurisdiction in broad sectors of the economy. The FTC’s mission is to prevent business practices that are anti-competitive, deceptive, or unfair to consumers and to enhance informed consumer choice and public understanding of the competitive process. To learn more about the FTC, visit www.ftc.gov.

As reported by ESR News in May 2016, the FTC released guidance for CRAs entitled ‘What Employment Background Screening Companies Need to Know About the Fair Credit Reporting Act (FCRA)’ to help them understand what defines them as CRAs under the FCRA. The guidance is at www.ftc.gov/tips-advice/business-center/guidance/what-employment-background-screening-companies-need-know-about.

ESR Helps Employers Avoid FCRA Lawsuits

Employment Screening Resources® (ESR) offers employers two complimentary whitepapers entitled ‘Common Ways Consumer Reporting Agencies are Sued Under the FCRA’ and ‘Common Ways Prospective or Current Employees Sue Employers Under the FCRA’ to alert them to the rising trend of class action lawsuits being filed for alleged violations of the FCRA. To learn more about ESR, please visit www.esrcheck.com.

NOTE: Employment Screening Resources® (ESR) does not provide or offer legal services or legal advice of any kind or nature. Any information on this website is for educational purposes only.

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