A Consumer Report is much broader in scope than just a credit report. It affects a wide variety of information obtained concerning job applicants. A Consumer Report includes criminal and civil records, driving records, civil lawsuits, reference checks and any other information obtained by a Consumer Reporting Agency (CRA). By following the FCRA, an applicant's privacy rights are protected.
When engaging the services of a Consumer Reporting Agency, both the employer and the CRA must follow the four steps described in this report. Failure to do so can result in substantial legal exposures, including fines, damages, punitive damages and attorneys fees.
STEP ONE-- Prior to obtaining a Consumer Report, an employer must certify to the Consumer Reporting Agency (CRA), that the employer will follow all the steps set forth in the Fair Credit Reporting Act. (Section 604) Specifically, the employer certifies that they:
· Use the information for employment purposes only.
· Not use the information in violation of any federal or state equal opportunity law.
· Will obtain all the necessary disclosures and consents as discussed below.
· Will give the appropriate notices in the event that an adverse action is taken against an applicant based in whole or in part on the contents of the Consumer Report.
· If an Investigative Consumer Report*, is requested, they will provide additional disclosures to the consumer.
STEP TWO--Disclosure to the Applicant and the Applicant's Written Consent. (Section 604)
You may download the ESS Release and Authorization form (this form satisfies both the disclosure and written authorization requirements) by clicking on the links below. Please note there are two releases. Some ESS clients never order credit reports and they do not want to imply to the applicant that a credit report will be obtained; therefore, one of the ESS Release and Authorization forms does not include the words “credit report” or “credit bureau.”
* If an employer wishes to receive an “Investigative Consumer Report,” the FCRA requires additional disclosures. (Section 606) An Investigative Consumer Report is a type of consumer report that includes information on a consumer's “character, general reputation, personal characteristics, or mode of living obtained through personal interviews with neighbors, friends, or associates of the consumer."
In short, if ESS is asked to conduct reference interviews or obtain any information that goes beyond merely verifying factual matters (such as dates, position, salary, etc) then ESS is being asked to provide an Investigative Consumer Report.
The purpose of this part of the FCRA is to give applicants and employees an opportunity to view the report that may have an adverse impact on them. If they believe the report to be inaccurate or incomplete, applicants may contact the Consumer Reporting Agency and dispute or explain information in the report. This prevents the possibility of inaccurate or incomplete information from causing an applicant’s denial of employment. The Federal Trade Commission (FTC) clearly ruled that an adverse action notice cannot be combined with the consumer report and Summary of Consumer Rights, as this would defeat the purpose of giving the consumer time to dispute the consumer report.
Neither the FCRA nor FTC prescribes any specific language to be used in a pre-adverse action communication. However, in addition to giving applicants a copy of the report and Summary of Consumer Rights, the employer should encourage them to contact the Consumer Reporting Agency (ESS) as soon as possible if they believe any of the report’s information to be inaccurate or incomplete.
You can download a sample of our Pre-Adverse Action Letter by clicking on the links below.
Once a copy of the report and summary of consumer rights are given to an applicant, the FCRA also does not specify how long the employer should wait before taking adverse action. The intent of the law is to give applicants and employees ample time to read the report and dispute the information if they wish.
After following Step 3, if the employer wishes to proceed with adverse action (based in whole or in part on the consumer report), the FCRA requires them to notify the applicant. The notification must contain certain language:
You can download a Sample Adverse Action Letter by clicking on the links below.
Some find it difficult to understand why Congress intended employers to provide applicants and employees with two separate notices – a pre-adverse action notice, and the adverse action notice. However, the FCRA clearly requires both notices. FTC staff has interpreted the law in this manner. The clear intent is to give job applicants and employees the maximum opportunity to correct any errors or omissions in a consumer report that may affect their ability to gain or retain employment.
These requirements are also explained in a document prepared by the Federal Trade Commission entitled, “Notice to Users of Consumer Reports.” The FCRA requires this notice be given to users of consumer reports to inform them of their legal obligations.
You can download the Notice To Users Of Consumer Reports by clicking on the links below:
Please feel free to call Employment Screening Services at any time regarding questions you may have about the FCRA and your obligations.
To download these instructions in Word or PDF Format you can click on the links below.