The Fair Credit Reporting Act (FCRA) governs virtually all pre-employment background checks of applicants done for employers by third parties. The FCRA is complete with a complicated sequence of mandatory notices and consents by and between the potential employer, the applicant, and the “consumer reporting agency” — a title given to the third-party vendor performing the background check. Any failure to comply with each step of the detailed requirements of the FCRA can result in litigation and penalty; usually involving a class of affected applicants. It is important, therefore, that those employers utilizing background checks by consumer reporting agencies, and the agencies themselves, should take steps to ensure that the process and the forms are compliant with the law.
Into this fray comes the federal Bureau of Consumer Financial Protection (BCFP) that, pursuant to the Economic Growth, Regulatory Relief, and Consumer Protection Act enacted in May of this year, has changed the content of the summary of rights notice that is required to be provided to the applicant in the FCRA process. The changes represent new rights for consumers and obligations for consumer reporting agencies, which went into effect this month. The law requires that the summary of rights provided under the FCRA reference these new rights and obligations. Click here for a copy of the new model notice provided by the BCFP.
The 2018 legislation mandated that nationwide consumer reporting agencies provide “national security freezes” free of charge to consumers. These “freezes” restrict prospective lenders from obtaining access to a consumer’s credit report, thus making it more difficult for identity thieves to open accounts or seek loans in a consumer’s name. The legislation also provided that when the FCRA required that a summary of rights is provided, that it include information regarding the security freeze.
The 2018 legislation also extended the minimum time that a consumer reporting agency must include an initial “fraud alert” from 90 days to one year. This fraud alert informs a prospective lender that a consumer may have been a victim of identity theft and requires the lender to take steps to verify the identity of anyone seeking credit in the consumer’s name.
While employers are not required to use the new model notice provided by the BCFP, they are required to include notification of the “security freeze” in whatever notice that they use.