The Consumer Financial Protection Bureau (CFPB) issued corrected model forms on November 14, 2012. Please see our updated blog post for a link to the corrected forms.
Employers will be required to use updated forms as part of their background check process by January 1, 2013, as responsibility for interpreting the federal Fair Credit Reporting Act (FCRA) transfers from the Federal Trade Commission (FTC) to the newly-created CFPB.
The three new forms are Appendix K, Appendix M, and Appendix N to 12 CFR part 1022. The primary changes in the forms reflect that consumers can contact the CFPB or visit the website at www.consumerfinance.gov/learnmore to obtain more information about their rights, as opposed to contacting the FTC.
The most significant of these forms for employers is entitled “A Summary of Your Rights Under the Fair Credit Reporting Act.” Employers must provide this Summary of Rights to applicants and employees when they (or their background check company) issue a pre-adverse action letter and in certain other situations.
The second form, “Notice to Users of Consumer Reports: Obligations of Users Under the FCRA,” is a form that the background check companies (also known as consumer reporting agencies) must provide to users of their services, such as employers. Lastly, similar changes were made to the “Notice to Furnishers of Information: Obligations of Furnishers Under the FCRA.” The FCRA requires consumer reporting agencies to provide this notice to providers of information in certain situations such as re-investigations where a consumer has disputed the information.
Why FCRA’s Rules Are Important to Employers
Employers that “negligently” or “willfully” fail to comply with any of the FCRA’s requirements may be subject to lawsuits brought by applicants or employees. Negligent failure to comply with the requirements can lead to actual damages and attorneys’ fees, while willful failure to comply with requirements can lead to statutory damages ($100-$1,000 per violation), attorneys’ fees, and punitive damages.
According to Jessica Fisher, an attorney in the Greenville, South Carolina office of Ogletree Deakins and a member of the firm’s Background Check Advice team: “It is vitally important that employers incorporate this new Summary of Rights into their background check process. In several recent class action cases, one of the allegations is that the employer used an outdated Summary of Rights.”
Sometime before January 1, 2013, employers should begin using the new FCRA Summary of Rights when providing pre-adverse action letters to applicants or employees and at other appropriate times.
Stephen R. Woods is a shareholder in the Greenville office of Ogletree Deakins.