Steps an Employer Can Take to Comply With the Fair Credit Reporting Act

By Lane V. Erickson, Attorney

In order to determine how an employer can comply with the Fair Credit Reporting Act, in creating an employment relationship with an employee, let’s consider the following common scenario. 　You are a manager at an employing company that has several job vacancies to fill. This company is also thinking about promoting some current employees to new or higher positions. The company has winnowed down the stack of applications and resumes and wants to run background checks on employee applicants through a third party company who is in the business of compiling background information. This will include obtaining a credit report for the prospective or current employees.

The steps that you and this employer company can now take to ensure that full compliance with the Fair Credit Reporting Act are as follows:

STEP 1 – BEFORE YOU GET A CREDIT REPORT.

Before you even get a credit or consumer report from any third party that you intend to rely on in making an employment decision you must:

• Tell the applicant or employee that you might use information in their credit report for decisions related to their employment. This notice must be in writing and in a stand-alone format. The notice cannot be in an employment application. You can include some minor additional information in the notice, like a brief description of the nature of credit reports, but only if it does not confuse or detract from the notice.
• Get written permission from the applicant or employee. This can be part of the document you use to notify the person that you will get a consumer report. If you want the authorization to allow you to get consumer reports throughout the person’s employment, make sure you say so clearly and conspicuously.
• Certify compliance to the company from which you are getting the applicant or employee’s information. To do this you must certify that you:

1. notified the applicant or employee and got their permission to get a consumer report;
2. complied with all of the FCRA requirements; and
3. not discriminate against the applicant or employee or otherwise misuse the information, as provided by any applicable federal or state equal opportunity laws or regulations.

STEP 2 – BEFORE YOU TAKE AN ADVERSE ACTION.

Before you reject a job application, reassign or terminate an employee, deny a promotion, or take any other adverse employment action based on information in a consumer report, you must give the applicant or employee:

• a written notice that includes a copy of the credit/consumer report you relied on to make your decision; and
• a copy of A Summary of Your Rights Under the Fair Credit Reporting Act, which the company that gave you the report is required to provide to you along with the credit/consumer report.

The purpose of giving the person the written notice in advance is that it provides gives the person with the opportunity to review the report and tell you if it is correct.

STEP 3 – AFTER YOU TAKE AN ADVERSE ACTION.

If you take an adverse action based on information in a consumer report, you must give the applicant or employee a notice of that fact – orally, in writing, or electronically. 　An adverse action notice tells people about their rights to see information being reported about them and to correct inaccurate information. The notice must include:

• the name, address, and phone number of the consumer reporting company that supplied the report;
• a statement that the company that supplied the report did not make the decision to take the unfavorable action and can’t give specific reasons for it; and
• a notice of the person’s right to dispute the accuracy or completeness of any information the consumer reporting company furnished, and to get an additional free report from the company if the person asks for it within 60 days.

STEP 4 – DISPOSING OF THE CREDIT/CONSUMER REPORTS.

When you’re done using a credit/consumer report, you must securely dispose of the report and any information you gathered from it. There is no specific directive in the Fair Credit Reporting Act on how to dispose of the credit/consumer report once you are done with it. The focus is simply to make sure that the information contained in the credit/consumer report stays confidential. 　For this reason, the method of disposal is not important so long as the information it contains can’t be read or reconstructed once disposal is completed.

If you have questions about how to use a credit report in the hiring process, we can help. Call us toll free at 877-232-6101 or 208-232-6101 for a consultation with Lane Erickson and the Racine Olson team of Employment Law attorneys in Idaho. You can also email Lane Erickson directly at lve@racinelaw.net. We will answer your Idaho Employment Law questions and will help you solve your Idaho Employment Law problems.

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