Written By Digital Content Editor Thomas Ahearn
The Consumer Financial Protection Bureau (CFPB) has issued an advisory opinion on “Fair Credit Reporting; Permissible Purposes for Furnishing, Using, and Obtaining Consumer Reports” to ensure that companies using and sharing background checks have a “permissible purpose” under the Fair Credit Reporting Act (FCRA).
The FCRA ensures fair and accurate reporting and requires users of background check reports to have a legally permissible purpose so they cannot check an individual’s personal information without a bona fide reason such as using reports for credit, insurance, housing, or employment decisions. The advisory opinion makes clear:
- Insufficient matching procedures can result in credit reporting companies providing reports to entities without a permissible purpose, which would violate consumers’ privacy rights.
- It is unlawful to provide credit reports of multiple people as “possible matches.”
- Disclaimers about insufficient matching procedures do not cure permissible purpose violations.
- Users of credit reports must ensure that they do not violate a person’s privacy by obtaining a credit report when they lack a permissible purpose for doing so.
“While Congress and regulators must do more to protect our privacy, the CFPB will be taking steps to use the Fair Credit Reporting Act to combat misuse and abuse of personal data on background screening and credit reports,” CFPB Director Rohit Chopra said in a press release about the advisory opinion released on July 7, 2022.
The advisory opinion also outlined some of the criminal liability provisions in the FCRA. Covered entities can face criminal liability for obtaining a background report on an individual under false pretenses or by providing a background report to an unauthorized individual. In addition to the steps already mentioned, the CFPB has:
- Highlighted the experiences of military families with medical billing, credit reporting, and debt collection.
- Spotlighted medical billing challenges faced by millions of American consumers.
- Identified credit reporting companies the public can hold accountable.
- Issued a bulletin to prevent unlawful medical debt collection and credit reporting.
- Taken action to stop the false identification of consumers by background screeners.
Enacted by the United States Congress in 1970, the FCRA is legislation that promotes the accuracy, fairness, and privacy of consumer information contained in the files of consumer reporting agencies (CRAs) and shields consumers from the willful and/or negligent inclusion of erroneous data in their credit reports.
Employment Screening Resources® (ESR) – a service offering of ClearStar, a leading Human Resource (HR) technology company specializing in background, drug, and health screening – offers background check services for employers that comply with federal, state, and local laws. To learn more, contact ESR today.
NOTE: Employment Screening Resources (ESR) – a service offering of ClearStar – 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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