Pre-Employment Screening Background Check Blog for Employers, Human Resources and Security by ESR

New rules cornering address discrepancies in consumer credit reports that could help to prevent identity theft go into effect November 1, 2008.  Beyond potentially creating some additional hoops to jump through,  the new rules are not likely as a practical matter to have a great deal of impact on employers and may even help employers avoid hiring someone operating with a stolen identification.

The new rules were written by various federal agencies as a result of provisions in the 2003 Fair and Accurate Credit Transactions Act of 2003 (FACTA), designed to combat identity theft when “Red Flags” were raised in credit reports.  Although employers are affected, the rules go well beyond employment and also regulate financial institutions and creditors.

Since the regulations are new, it is not yet entirely clear how they will be implemented.  However, employers would be impacted if they request a credit report from a background screening firm as part of a background report.  The credit reports are supplied to background firms by one of the three national credit bureaus, which are Experian, Trans Union or Equifax.

It also important to keep in mind that for employment purposes, these regulations only apply to information from a national credit bureau, which will mean as a practical matter it is limited to only those applicants where an employer requests a credit report.  Other types of background reports, such as criminal records, driving records, past employment or educational verification are not impacted.

If the credit bureau finds an address discrepancy which raises a “Red Flag,” the employer would receive a notice from the credit bureaus.  This could occur if the applicant submits an address that the credit bureaus do not find in their records, or it appears that there is a “substantial difference” between the applicant’s address and what the credit bureau has on file.

An employer that utilizes credit reports will need to establish a policy on how it will verify the applicant’s identity through reasonable means, such as confirming information directly with the applicant, using third party sources or utilizing other materials, such as employment application forms.

Once the address and identity of the applicant is clarified, an employer also under certain circumstances must then send back the newly confirmed address to the credit bureaus.  Although there will need to be some clarification in the near future on how this will work exactly,  it would appear reasonable that the background firm providing the credit report may be able to act as the go-between for the employer and the national credit bureau in the administration of this rule.

The important point for employers is that the address discrepancy notices are not likely to be a significant burden on employers or Human Resources professionals. Employers would expect to receive such notices primarily in two situations; First, if an applicant has moved to a new address that has not been picked up by credit bureaus, such a notice may be generated.  Secondly, an employer may get a notice where there is a case of identity theft with an applicant impersonating someone else.  In that event, employers will benefit from the new rules.

Once the actual operations of the regulations become clearer, ESR will provide its clients with a sample policy and will assist clients if and when such a notice is received. ESR will also provide training to all clients that request credit reports as part of their background checking protocol.

In the September, 2008 issue of the ESR Newsletter, readers were alerted to two bills in California that would have affected background checks.  Both bills were vetoed by Governor Schwarzenegger.

• AB 2918 would have severely restricted the use of employment credit reports.
• AB 3063 would have amended California law on the usage of criminal records.

For a copy of the Governor’s veto message, please contact Jared Callahan at 415-898-0044 or by e-mail at jcallahan@esrcheck.com

Four years ago, ESR reported an investigation by the Dallas News concerning inadequacies in the statewide criminal database maintained by the Texas Department of Public Safety (TDPS).  That database is widely use by law enforcement, employers and consumers, among others, and is also used to perform screenings on teachers, volunteers and caregivers that work with children, the sick and the frail.  The original article can be found in the ESR newsletter archives at:  http://www.esrcheck.com/newsletter/archives/March_2005.php#T2

In that article, ESR reported that according to the newspaper article, the Texas database was used over 3 million times a year, but it only had 69 percent of the complete criminal histories records for 2002.

The Dallas News revisited the story in August 2008 and found, essentially, that nothing had changed. For 2006, the database still only had 69% of the state’s criminal history. The story noted that only 106 out of Texas’ 254 counties reported electronically, and even then there appeared to be glitches or communication issues with various state law enforcement agencies.  Other problems had to do with keeping trained personnel or officials in smaller jurisdictions forgetting to report the status of a case.  The full story is at: http://www.dallasnews.com/sharedcontent/dws/news/texassouthwest/stories/DN-database_22tex.ART.State.Edition2.4d7427d.html

This story underscores a common issue for employers performing background checks.  Searches of criminal databases can be problematic.  ESR recommends that employers keep the following in mind when utilizing criminal databases;

1.  Database searches available to private employers are NOT FBI database searches.  FBI records are only available to certain employers or industries where Congress or a state has granted access.  Searches offered by background firms are drawn from government data that is commercially available or has been made public.

2.  Although multi-jurisdictional and statewide databases searches can be extremely valuable because they cover a wide area and access millions of records, employers are well-advised to use them primarily as a research tool or lead-generator and not as a  substitute for a hands-on search at the county level under any circumstances (or the functional equivalent of a county level search). The best use is to indicate additional places to search in case a record is found in a jurisdiction that was not searched at the county court level.

3.  In addition, not all states have a database that is available to employers.  In some instances, the databases that are available have limited information.  Therefore, the value of these searches may be very limited in some states. An employer should carefully review what information is available in their state and not merely depend upon a database search.

4.  Databases in each state are compiled from a number of sources.  There are a number of reasons that database information may not be accurate or complete.  Because of the nature of databases, the appearance of a person’s name on a database is not an indication the person is criminal any more than the absence of a name shows he/she is not a criminal. Any positive match MUST be verified by reviewing the actual court records.  Any lack of a match is not the same as a person being “cleared.” However, a database is a valuable tool in helping employers cover a wider area and know where to search for more information.

5.  The search is based upon matching the name and the date of birth in order to eliminate computer matches that are not applicable. Note: In some states, there is no, or limited, date of birth information.  The database description will indicate where the records do not contain a date of birth, which means a search of that state will have little or no value.

6.  The best practice is for all possible “hits” to be reconfirmed at the county court level to insure whether information is  accurate, complete and up to date at the time it is reported, per FCRA Section 613. Also, keep in mind that a criminal record should not be used to automatically disqualify an applicant, without taking into account the EEOC rules as to what is a job-related criminal offense.