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Key provisions to the FCRA
  • There are many key provisions to the FCRA that employers should be aware of.

There are many key provisions of the Federal Credit Reporting Act (FCRA), including:

  • Certifications to consumer reporting agencies (CRAs),
  • Written notices and authorization,
  • Adverse action procedures,
  • Trucker exemptions,
  • Employee misconduct investigation exclusions, and
  • Enhanced disclosure requirements related to credit scores.

Certifications to consumer reporting agencies

Before giving employers an individual’s consumer report, the CRA will require them to certify that:

  • They are in compliance with the FCRA, and
  • They will not misuse any information in the report in violation of federal or state equal employment opportunity laws or regulations.

Written notice and authorization

Before employers can get a consumer report for employment purposes, they must:

  • Notify the individual in writing that a report may be used. This document must consist solely of this notice, and
  • Get the person’s written authorization before they ask a CRA for the report.
    • Special procedures apply to the trucking industry and for employee misconduct investigations.

Adverse action procedures

An adverse action is when employers:

  • Deny a job application
  • Reassign or terminate an employee
  • Deny a promotion

If employers rely on a consumer report for an adverse action, there are steps to follow, such as:

  • Before they take the adverse action, they must give the individual:
    • A pre-adverse action disclosure that includes a copy of the individual’s consumer report; and
    • A copy of “A Summary of Your Rights Under the Fair Credit Reporting Act,” a document prescribed by the Federal Trade Commission.
      • The CRA that furnishes the individual’s report will give the employer the summary of consumer rights.
  • After they have taken an adverse action, they must give the individual an adverse action notice orally, in writing, or electronically. It must include:
    • The name, address, and phone number of the CRA that supplied the report;
    • A statement that the CRA that supplied the report did not make the decision to take the adverse action and cannot give specific reasons for it; and
    • A notice of the individual’s right to:
      • Dispute the accuracy or completeness of any information the agency furnished; and
      • Request an additional free consumer report from the agency within 60 days.

Trucker exemption

In 1998, Congress amended the FCRA to provide special procedures for mail, telephone, or electronic employment applications in the trucking industry. In the case of applicants who will be subject to state or federal regulations as truckers, employers do not need to:

  • Make written disclosures, or
  • Obtain written permission.

No pre-adverse action disclosure is required. Instead, employers must, within three days of the decision, provide an oral, written, or electronic adverse action disclosure consisting of:

  • A statement that an adverse action has been taken based on a consumer report;
  • The name, address, and telephone number of the CRA;
  • A statement that the CRA did not make the decision; and
  • A statement that consumers may obtain a copy of the actual report from employers if they provide identification.

Also, employers should be aware of the procedures with respect to obtaining and providing information about a driver’s safety performance history set under:

  • Section 4014 of TEA-21 (Transportation Equity Act for the 21st Century, enacted June 9, 1998); and
  • CFR 391.23.

Enhanced disclosure requirements related to credit scores

Section 1100F of the Dodd-Frank Wall Street Reform and Consumer Protection Act amended the FCRA’s disclosure requirements related to adverse action taken because of an individual’s credit score.

If a credit score is used in whole or in part in employers’ decisions to take adverse action against an employee or applicant, they must disclose the following information either electronically or in writing:

  • The credit score used in taking adverse action;
  • The range of credit scores possible under the credit scoring model used;
  • The factors that adversely affected the credit score, ranked in order of importance;
    • This should not exceed four. If the number of credit inquires is itself a factor, this must be reported and should not be counted as one of the four factors.
  • The date the credit score was created;
  • The name of the CRA that supplied the credit score; and
  • A prescribed statement explaining credit scores.

The enhanced credit score disclosure requirements are in addition to the existing pre-adverse action and adverse action disclosures.

Employers do not need to make the additional credit score and related information disclosures if:

  • No credit score is used in making an adverse employment decision; or
  • A decision is made because an individual has no credit score.

However, they will still need to provide the traditional pre-adverse action and adverse action disclosures.