SUMMARY OF THE FAIR CREDIT REPORTING ACT

Transcription

1 SUMMARY OF THE FAIR CREDIT REPORTING ACT The Fair Credit Reporting Act (FCRA) covers the use of many types of consumer information maintained by consumer reporting agencies. Consumer reports are defined in this statute to include information not only relating to the credit standing of an individual, but also character, general reputation, personal characteristics and mode of living. Under this law, driving records obtained for employment purposes are considered consumer reports. How do we obtain a copy of an employee s driving record? Employers have the following obligations regarding the obtainment of driving records of employees and job applicants: 1. Make a clear and conspicuous written disclosure to employees and job applicants before any driving records are obtained. (See Attachment A - Sample Notice of Intent to Obtain Consumer Report) 2. Obtain individual written authorization from each employee or job applicant prior to obtaining the record. This must be done independent of the notice requirement mentioned above. (See Attachment B - Sample Written Authorization to Obtain Consumer Report) 3. Provide a copy of the driving record to the employee/job applicant as well as a summary of the consumer rights before taking any adverse action. (See sample Attachment E - Summary of Consumer Rights.) Please note that a conditional job offer must be made to a job applicant prior to obtaining the driving record of that individual. What should we do if the driving record leads to adverse action? If you decide, based in whole or in part on the report you receive, that you cannot hire, promote, reassign or retain the individual, or suspension of driving privileges will be invoked, you must go through what is called an Adverse Action procedure. This procedure protects the individual from decisions based on a report that may be inaccurate or incomplete. You do not have to go through this procedure if your employment decision is not based on a consumer report. The additional disclosure obligations require the employer to provide the following information to the employee/job applicant: 1. That adverse action has been taken in whole or in part based on a consumer report; 2. The name, address, phone number (including toll-free number, if available) of the credit reporting agency;

2 3. That the credit reporting agency did not make the decision to take adverse action and is unable to provide the reasons why the adverse action was taken; and 4. That the consumer may, upon providing proper identification, request a free copy of a report within 60 days and may dispute with the credit reporting agency the accuracy or completeness of the report. Steps in the Adverse Action Process: 1. Before you take Adverse Action, you must give the individual a Pre-Adverse Action Notice, a copy of the consumer report and a copy of the Consumer Financial Protection Bureau s document entitled "A Summary of Your Rights under the Fair Credit Reporting Act." A sample Pre-Adverse Action notice is included as Attachment C. The Pre-Adverse Action notice should include the following information: a) The name, address and phone number of the agency issuing the report and the statement that the individual must contact the consumer reporting agency directly to dispute the report; and b) If the individual wishes to explain any items that appear on the report, the individual should contact the person signing the Pre-Adverse Action Notice. If you still cannot hire, promote, reassign or retain the individual, or suspension of driving privileges will be invoked, you must give the individual a Final Adverse Action notice as follows: 2. Provide the individual the Notice of Adverse Action either orally, in writing or electronically. A sample of a Final Adverse Action Notice is included as Attachment D. This notice must include the following information: a) The name, address and phone number of the agency issuing the report; b) A statement that the agency did not make the decision to take adverse action and cannot give specific reasons for the action; and c) A notice of the individual's right to dispute the accuracy or completeness of any information the agency furnished and his or her right to an additional free copy of the report within 60 days directly from the agency. Once you have completed both of these steps, you are no longer legally obligated to hold the position open for a job applicant and may fill it with another candidate. Miscellaneous Considerations Keep in mind that the FCRA must be observed in conjunction with all other state and federal laws. For example, the employer must still observe civil rights statutes that make it unlawful to obtain information such as a job applicant s date of birth, sex, medical history, etc. on a pre-employment basis. Therefore, the employment practice of using written conditional job offers must be continued. -2-

3 To obtain a driving record for a job applicant requires the employer to know the applicant s date of birth. Thus, the written conditional job offer must be used in conjunction with the FCRA. For a complete reprint of the Fair Credit Reporting Act or other employment laws, contact an Association Attorney at In the interim, please refer to Attachment F which outlines, in substantial detail, the employer obligations under the FCRA. Penalties for Violation or Misuse Both state and federal law impose significant penalties for violations of the FCRA or other misuses of information. The following is a summary of some of those penalties. Additional penalties may apply. Michigan Law Under Michigan law, a person who makes a false representation or a false certification to obtain personal information or who uses personal information for a purpose other than a permissible purpose identified in law is guilty of a felony, which may be punishable by imprisonment for up to 5 years and/or a fine of up to $5,000. Subsequent convictions may result in imprisonment for up to 15 years and/or a fine of up to $15,000. Federal Law In the event of a knowing violation, which constitutes a pattern or practice of violations of this title, the Commission may commence a civil action to recover a civil penalty in a district court of the United States against any person that violates this title. In such action, such person shall be liable for a civil penalty of not more than $3,500 per violation. Any person who willfully or negligently fails to comply with any requirement imposed under this title with respect to any consumer may be liable for fines, punitive damages, actual damages and attorney fees. Any person who knowingly and willfully obtains information on a consumer from a consumer reporting agency under false pretenses shall be fined under title 18, United States Code, imprisoned for not more than 2 years, or both. This FCRA Summary and all accompanying documents were developed for Michigan Assisted Living Association. They were designed to make general recommendations regarding employment practices and procedures for employers in the State of Michigan. These forms are general in nature and should not be used as a sole source of guidance. Employment laws are adopted and amended frequently. Judicial opinions that interpret state and federal employment laws often dictate changes in policy or practice. MALA attorneys recommend that this document be used simply as a discussion tool for developing and updating personnel policies. It is essential that the employing organization seek the advice and guidance of its private legal counsel prior to adopting and implementing any of the policies contained herein. It is also important to note that the FCRA compliance policies must be carefully coordinated with the Employer s job application, written conditional job offer, employment posters and notices and other employment related practices. -3-

4 ATTACHMENT A Sample Notice of Intent to Obtain Consumer Report Pursuant to the Fair Credit Reporting Act, we are providing this notice that a consumer report, in the form of a driving record check, will be obtained by for (Employer Name) employment purposes. To acknowledge receipt of this notice and a summary of the federal law, please sign and date this employer record. Print Name: (employee/job applicant) Signature: Date: -4-

5 ATTACHMENT B Sample Written Authorization to Obtain Consumer Report I, hereby authorize you to release the following information to (employee/applicant s name), for purposes of investigation as required by Section of (employer name) the Federal Motor Carrier Safety Regulations and the disclosure requirements under the Fair Credit Reporting Act for employment purposes. You are released from any and all liability that may result from furnishing such information. (Employee/Applicant s Signature) (Date) 1. In accordance with the provisions of Section 604 and 607 of the Fair Credit Reporting Act, P.L , I,, hereby certifies that the information requested (employer name) below will be used for permissible purposes as defined in the Act, and that information received will be used for no other purpose. 2. I,, further certifies that if the applicant named below is denied (employer name) employment based upon the information received, I,, will (employer name) identify the source of the report in accordance with Section 615(a) of the Fair Credit Reporting Act. Employee/Applicant (date) Employer Representative (date) -5-

6 ATTACHMENT C Sample Pre-Adverse Action Letter Date Applicant Name Address City, State, ZIP RE: Pre Adverse Action Notice Dear <Applicant>: This letter is being sent to you in compliance with the Fair Credit Reporting Act, 15 U.S.C. Section 1681b(b)(3) to inform you that you may be denied a position with our organization based on information received from the consumer reporting agency listed below during a pre-employment background investigation: Name of Consumer Reporting Agency Address City, State ZIP Phone Please find attached a copy of the report that was provided to us, as well as a copy of the Consumer Financial Protection Bureau s publication, "A Summary of Your Rights Under the Fair Credit Reporting Act." Should you wish to explain any items that appear on the report, please contact the undersigned immediately. Should you wish to contest any information that appears in the report, you must contact the consumer reporting agency directly pursuant to the information in the Consumer Financial Protection Bureau s publication. Cordially, <Employer Name> Enclosed: "A Summary of Your Rights Under the Fair Credit Reporting Act." -6-

7 ATTACHMENT D Sample Final Notice of Adverse Action Date Applicant Name Address City, State, ZIP RE: Final Adverse Action Notice Dear <Applicant>: This letter is being sent to you in compliance with the Fair Credit Reporting Act, 15 U.S.C. Section 1681(m)(a) to inform you that you have been denied a position with our organization based on information received from the consumer reporting agency listed below during a pre-employment background investigation: Name of Consumer Reporting Agency Address City, State ZIP Phone Please know that NAME OF CONSUMER REPORTING AGENCY did not make any decision regarding your employment and cannot explain to you why the decision was made. Pursuant to the Fair Credit Reporting Act, you have the following rights: 1. You may obtain an additional free copy of your report by contacting NAME OF CONSUMER REPORTING AGENCY within 60 days of receipt of this notice. 2. You may dispute any inaccurate or incomplete information contained in the report directly with NAME OF CONSUMER REPORTING AGENCY. Cordially, <Employer Name> -7-

8 ATTACHMENT E "A Summary of Your Rights Under the Fair Credit Reporting Act." [This Section Intentionally Left Blank] -8-

9 Para information en español, visite o escribe a la Consumer Financial Protection Bureau, 1700 G Street N.W., Washington, DC A Summary of Your Rights Under the Fair Credit Reporting Act The federal Fair Credit Reporting Act (FCRA) promotes the accuracy, fairness, and privacy of information in the files of consumer reporting agencies. There are many types of consumer reporting agencies, including credit bureaus and specialty agencies (such as agencies that sell information about check writing histories, medical records, and rental history records). Here is a summary of your major rights under the FCRA. For more information, including information about additional rights, go to or write to: Consumer Financial Protection Bureau, 1700 G Street N.W., Washington, DC You must be told if information in your file has been used against you. Anyone who uses a credit report or another type of consumer report to deny your application for credit, insurance, or employment or to take another adverse action against you must tell you, and must give you the name, address, and phone number of the agency that provided the information. You have the right to know what is in your file. You may request and obtain all the information about you in the files of a consumer reporting agency (your file disclosure ). You will be required to provide proper identification, which may include your Social Security number. In many cases, the disclosure will be free. You are entitled to a free file disclosure if: a person has taken adverse action against you because of information in your credit report; you are the victim of identity theft and place a fraud alert in your file; your file contains inaccurate information as a result of fraud; you are on public assistance; you are unemployed but expect to apply for employment within 60 days. In addition, all consumers are entitled to one free disclosure every 12 months upon request from each nationwide credit bureau and from nationwide specialty consumer reporting agencies. See for additional information. You have the right to ask for a credit score. Credit scores are numerical summaries of your credit-worthiness based on information from credit bureaus. You may request a credit score from consumer reporting agencies that create scores or distribute scores used in residential real property loans, but you will have to pay for it. In some mortgage transactions, you will receive credit score information for free from the mortgage lender. You have the right to dispute incomplete or inaccurate information. If you identify information in your file that is incomplete or inaccurate, and report it to the consumer reporting agency, the agency must investigate unless your dispute is frivolous. See for an explanation of dispute procedures. -9-

10 Consumer reporting agencies must correct or delete inaccurate, incomplete, or unverifiable information. Inaccurate, incomplete or unverifiable information must be removed or corrected, usually within 30 days. However, a consumer reporting agency may continue to report information it has verified as accurate. Consumer reporting agencies may not report outdated negative information. In must cases, a consumer reporting agency may not report negative information that is more than seven years old, or bankruptcies that are more than 10 years old. Access to your file is limited. A consumer reporting agency may provide information about you only to people with a valid need usually to consider an application with a creditor, insurer, employer, landlord, or other business. The FCRA specifies those with a valid need for access. You must give your consent for reports to be provided to employers. A consumer reporting agency may not give out information about you to your employer, or a potential employer, without your written consent given to the employer. Written consent generally is not required in the trucking industry. For more information, go to You may limit prescreened offers of credit and insurance you get based on information in your credit report. Unsolicited prescreened offers for credit and insurance must include a toll-free phone number you can call if you choose to remove your name and address from the lists these offers are based on. You may opt-out with the nationwide credit bureaus at You may seek damages from violators. If a consumer reporting agency, or, in some cases, a user of consumer reports or a furnisher of information to a consumer reporting agency violates the FCRA, you may be able to sue in state or federal court. Identity theft victims and active duty military personnel have additional rights. For more information, visit

11 States may enforce the FCRA, and many states have their own consumer reporting laws. In some cases, you may have more rights under state law. For more information, contact your state or local consumer protection agency or your state Attorney General. For information about your federal rights, contact: TYPE OF BUSINESS: 1.a. Banks, savings associations, and credit unions with total assets of over $10 billion and their affiliates. b. Such affiliates that are not banks, savings associations, or credit unions also should list, in addition to the Bureau: 2. To the extent not included in item 1 above: a. National banks, federal savings associations, and federal branches and federal agencies of foreign banks. b. State member banks, branches and agencies of foreign banks (other than federal branches, federal agencies, and insured state branches of foreign banks), commercial lending companies owned or controlled by foreign banks, and organizations operating under section 25 or 25A of the Federal Reserve Act. c. Nonmember insured banks, insured state branches of foreign banks, and insured state savings associations. d. Federal credit unions. 3. Air carriers. 4. Creditors subject to Surface Transportation Board. CONTACT: a. Bureau of Consumer Financial Protection 1700 G Street NW Washington, DC b. Federal Trade Commission: Consumer Response Center FCRA Washington, DC (877) a. Office of the Comptroller of the Currency Customer Assistance Group 1301 McKinney Street, Suite 3450 Houston, TX b. Federal Reserve Consumer Help Center P.O. Box 1200 Minneapolis, MN c. FDIC Consumer Response Center 1100 Walnut Street, Box #11 Kansas City, MO d. National Credit Union Administration Office of Consumer Protection (OCP) Division of Consumer Compliance and Outreach (DCCO) 1775 Duke Street Alexandria, VA Asst. General Counsel for Aviation Enforcement & Proceedings Department of Transportation 400 Seventh Street SW Washington, DC Office of Proceedings, Surface Transportation Board Department of Transportation 1925 K Street NW Washington, DC Creditors subject to Packers and Stockyards Act. Nearest Packers and Stockyards Administration area supervisor 6. Small business investment companies. 7. Brokers and dealers. 8. Federal land banks, federal land bank associations, federal intermediate credit banks, and production credit associations. 9. Retailers, finance companies, and all other creditors not listed above. Associate Deputy Administrator for Capital Access United States Small Business Administration 406 Third Street, SW, 8 th Floor Washington, DC Securities and Exchange Commission 100 F Street NE Washington, DC Farm Credit Administration 1501 Farm Credit Drive McLean, VA FTC Regional Office for region in which the creditor operates or Federal Trade Commission: Consumer Response Center FCRA Washington, DC (877)

12 ATTACHMENT F Appendix C to Part 601 FCRA Prescribed Notice of User Responsibilities [This Section Intentionally Left Blank] -12-

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