A Quick Review of the FCRA
and the Use of Consumer Reports for Employment Purposes

It has been three years since the amendments to the Federal Fair Credit Reporting Act took effect on October 1, 1997. Many of you who request ESS Reports to help with employment decisions may have started your current position since that time. We realize transitioning into a new position is a hectic time, and it's possible the FCRA guidelines, forms, and information did not get into your hands.

The following is a quick review of the FCRA amendments that impact employment screening. Please call us if you have any questions, or visit our website at www.employscreen.com in our clients only section. (To get into the For Clients Only section, the ID is ess, and the password is employment.) You can access the entire FCRA at the Federal Trade Commission website at www.ftc.gov or from our links page.

Four Important Steps in Complying with the FCRA:

1.    Employment Screening Services is regulated as a consumer reporting agency, and as such, the FCRA requires that each of our clients sign a User Agreement. If you have received an ESS report in the last three years, then we already have an agreement on file for your company. In the User Agreement, our clients agree to: (1) only use ESS for employment purposes, and (2) comply with steps 2,3 and 4 below.

2.    The applicant must sign a FCRA compliant disclosure/authorization form before an ESS report is ordered. The form must follow three specific requirements.

a. The form must "clearly and conspicuously" disclose that a consumer report may be obtained for employment purposes.

b. The consumer (applicant) must give written authorization for the procurement of the report.

c. The disclosure/written authorization must be on a separate form. In other words, it cannot be part of the application or on the same page as other application documents.

* The disclosure/authorization is necessary for any type of ESS report. To obtain an applicant's credit report, ESS additionally requires that "Credit Report" be specifically named in the release statement.

3.    Before taking any adverse action based in whole or in part on the consumer (ESS) report, the person intending to take the action must first provide the applicant with:

a. Copy of the report.

b. Copy of the rights of the consumer as prescribed by the FTC. A copy of these rights has been provided to your company. They are also available on our website.

* Once a copy of the report and the summary of consumer rights are given to the applicant, the FCRA does not specify how long an employer should wait before adverse action can be taken. The intent of the law is for the consumer to have enough time to read the report and have an opportunity to dispute any information in the report if necessary. FTC staff counsel has suggested that five days is appropriate.

4.    When adverse action is taken, the FCRA states the notification can be oral or written; however, written notification is recommended for record-keeping purposes. The notification should include:

a. The name, address, and phone number of the consumer reporting agency.

b. A statement that the consumer reporting agency (ESS) did not make the decision to take adverse action and is unable to provide the applicant or employee with the specific reasons why adverse action was taken.

c. A notice of the applicant's or employee's right to obtain a free copy of the complete consumer report from the reporting agency (ESS), as well as information regarding the consumers' right to dispute the information with the reporting agency.

* You can find a sample Adverse Action letter in the For Clients Only section of our website.

Overall, we have found that the new FCRA obligations have been working to the advantage of applicants/employees, employers, and the consumer reporting agencies. Please feel free to call ESS regarding any questions that you may have about the FCRA obligations. You you may also e-mail your questions to johnb@employscreen.com. We will do our best to explain our position; however, this information is not to take the place of legal counsel. Please consult your legal department before making any changes to your hiring process.

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