Employers Must Use Updated Summary of Rights Under Fair Credit Reporting Act

The Consumer Financial Protection Bureau (CFPB) Recently Published an Updated “Summary of Your Rights” Form

New York and New Jersey employers that conduct background checks should be sure to update their forms. Effective September 21, 2018, the Consumer Financial Protection Bureau (CFPB) published an updated “Summary of Your Rights” form, which is required under the federal Fair Credit Reporting Act (FCRA).

FCRA Notice and Disclosure Requirements

The FCRA, which applies when employers obtain background check information from third-party consumer reporting agencies, imposes strict notice and disclosure requirements on employers. It requires employers to notify job applicants and employees that they might use information in their consumer report for decisions related to their employment. The FCRA also requires employers to obtain written authorization to obtain the reports. This written disclosure must be in a stand-alone format separate from the job application and not contain any other content, although it may be contained with the authorization. 

When employers obtain an “investigative report,” a report based on personal interviews concerning a person’s character, general reputation, personal characteristics, and lifestyle, they must also tell the applicant or employee of his or her right to a description of the nature and scope of the investigation. In addition, employers are required to provide a copy of “A Summary of Your Rights Under the Fair Credit Reporting Act.”

When taking an adverse action, such as not hiring an applicant or terminating an employee, based on background information obtained through consumer reporting agency, the FCRA has additional requirements. Prior to taking the employment action, the employer must give the applicant or employee a notice that includes a copy of the consumer report relied upon in making the decision and a copy of “A Summary of Your Rights Under the Fair Credit Reporting Act.”

After employers take an adverse employment action, they must tell the applicant or employee (orally, in writing, or electronically): that he or she was rejected because of information in the report; the name, address, and phone number of the company that sold the report; that the company selling the report didn’t make the hiring decision, and can’t give specific reasons for it; that he or she has a right to dispute the accuracy or completeness of the report, and to get an additional free report from the reporting company within 60 days.

Amended Summary of Your Rights Form

The CFPB has revised the model form to reflect amendments to the FCRA. In May, Congress passed the Economic Growth, Regulatory Relief, and Consumer Protection Act, which requires nationwide consumer reporting agencies to provide “national security freezes” free of charge to consumers. The new legislation also mandates that whenever the FCRA requires a consumer to receive either the Summary of Consumer Rights or the Summary of Consumer Identity Theft Rights, a notice regarding the new security freeze right also must be included.

The Economic Growth, Regulatory Relief, and Consumer Protection Act also extends the minimum time that nationwide consumer reporting agencies must include an initial fraud alert in a consumer’s file from 90 days to one year. A fraud alert informs a prospective lender that a consumer may have been a victim of identity theft and requires that the lender take steps to verify the identity of anyone seeking credit in the consumer’s name.

The revised Summary of Your Rights form, which is available here, includes the above changes to the FCRA. To mitigate the impact of these changes on users of the existing model forms, the CFPB’s interim final rule provides that the Bureau will regard the use of the old model forms (dated November 14, 2012) to constitute compliance with the FCRA, so long as a separate page that contains the additional required information is provided in the same transmittal. 

Key Takeaway for New York and New Jersey Employers

The FCRA has consistently been a litigation trap for unwary businesses. Given that the improper use or non-use of the Summary of Rights form has been the subject of class-action lawsuits, employers should verify that they are using the correct version of the form or providing the new information now required under the FCRA.