Fair Credit Reporting Act (FCRA)

Written By ESR News Blog Editor Thomas Ahearn

On November 22, 2019, the Consumer Financial Protection Bureau (CFPB) – an agency enforcing federal consumer financial laws – filed a proposed Stipulated Final Judgment and Order that will require a background screening company to pay $6 million in monetary relief and a $2.5 million civil money penalty to resolve allegations of Fair Credit Reporting Act (FCRA) violations, according to a news report from the CFPB.

The CFPB and the Defendant background screening company agreed to the entry of the proposed Stipulated Final Judgment and Order “without adjudication of any issue of fact or law, to settle and resolve all matters in dispute arising from the conduct alleged in the complaint,” and the background screening company also “neither admits nor denies any allegations in the complaint, except as specified in this order.”

Along with the $6 million paid to affected consumers and the $2.5 million civil money penalty paid to the CFPB, the proposed settlement will also require the background screening company – whose primary business is to prepare background screening reports on job applicants to assist employers in hiring decisions – to include injunctive relief to prevent the allegedly illegal conduct from ever recurring again, the CFPB reported.

In the original complaint filed in the federal district court in the Southern District of New York, the CFPB claimed the background screening company violated the FCRA – a federal law regulating background checks for employment purposes in the United States – by failing to employ reasonable procedures to ensure the maximum possible accuracy of the information included in the consumer reports it prepared.

Specifically, the complaint claimed the background screening company’s procedures created a heightened risk that its reports would include criminal records belonging to other individuals with the same name as applicants and “high-risk indicators” that characterized addresses where applicants may have lived at as “high risk” in its reports without taking any steps to verify their accuracy.

The complaint also claimed the background screening company violated the FCRA by failing to maintain strict procedures to ensure public record information included in reports was complete and up to date, failing to notify consumers of the fact that such public record information was being reported, and reporting adverse information about consumers such as criminal history outside of the allowable reporting period.

Enacted in 1970, the FCRA promotes the accuracy, fairness, and privacy of consumer information in the files of “Consumer Reporting Agencies (CRAs)” – the official term for background screening providers – and protects consumers from the willful and/or negligent inclusion of inaccurate information in their “consumer reports,” the official term for background screening reports used for employment purposes.

While this FCRA settlement involved a background screening company, lawsuits claiming FCRA violations can also be costly to employers. Examples of settlements involving employers include 7-Eleven paying $1.9 million in June 2019, Delta Air Lines paying $2.3 million in January 2019, Omincare paying $1.3 million in August 2018, a subsidiary of PepsiCo paying $1.2 million in July 2018, and Frito-Lay Inc. paying a $2.4 million in April 2018.

Employers have paid out $174 million over the past decade to settle allegations that they violated the FCRA, according to an examination of 146 successful class action lawsuits brought under the statute that was compiled by Good Jobs First. Background screening companies providing consumer reports have paid out another $152 million when they have been sued directly, Good Jobs First found.

Employment Screening Resources® (ESR) – a leading global background check provider – offers two complimentary white papers that examine the causes of costly FCRA lawsuits: “Common Ways Prospective or Current Employees Sue Employers Under the FCRA” and “Common Ways Consumer Reporting Agencies are Sued Under the FCRA.” To learn more about ESR, 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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