FCRA NOTICE REQUIREMENTS NOW IN EFFECT
Earlier this month, the Consumer Finance Protection Bureau (CFPB) issued updated model disclosure forms required under the federal Fair Credit Reporting Act (FCRA). The updated “Summary of Your Rights Under the Fair Credit Reporting Act” form, which became effective on September 21, 2018, is one of many notices’ employers must provide under the FCRA when using a consumer reporting agency to run a background check during the hiring process.
Changes to the Form
In May 2018, Congress passed the Economic Growth, Regulatory Relief and Consumer Protection Act (the “Act”). The Act adds new language to the Summary of Your Rights form which explains that consumers may obtain a “security freeze” free of cost. A security freeze allows a consumer to freeze their account so that a consumer reporting agency may not release information on a credit report without the consumer’s authorization. The new form language also cautions applicants that using the security freeze may delay, interfere or prohibit timely approval of an application. As an alternative to the security freeze, consumers also have the right to place an initial or extended fraud alert on their credit file free of cost. The new form extends the time frame of a fraud alert from the previously enacted 90 days to a full year. For consumers that are victims of identity theft, the fraud alert can be extended up to 7 years.
Although the updated forms are now effective, to help mitigate the impact of the changes on users of the existing model forms, the CFPB’s interim rule will allow continued use of the forms last updated in 2012, so long as a separate page that contains the newly required information (i.e., the security freeze and fraud coverage rights) is provided at the same time. (see below)
New Requirements For FCRA Disclosure (actual verbiage)
CONSUMERS HAVE THE RIGHT TO OBTAIN A SECURITY FREEZE
You have a right to place a “security freeze” on your credit report, which will prohibit a consumer reporting agency from releasing information in your credit report without your express authorization. The security freeze is designed to prevent credit, loans, and services from being approved in your name without your consent. However, you should be aware that using a security freeze to take control over who gets access to the personal and financial information in your credit report may delay, interfere
with, or prohibit the timely approval of any subsequent request or application you make regarding a new loan, credit, mortgage, or any other account involving the extension of credit.
As an alternative to a security freeze, you have the right to place an initial or extended fraud alert on your credit file at no cost. An initial fraud alert is a 1-year alert that is placed on a consumer’s credit file. Upon seeing a fraud alert display on a consumer’s credit file, a business is required to take steps to verify the consumer’s identity before extending new credit. If you are a victim of identity theft, you are entitled to an extended fraud alert, which is a fraud alert lasting 7 years.
A security freeze does not apply to a person or entity, or its affiliates, or collection agencies acting on behalf of the person or entity, with which you have an existing account that requests information in your credit report for the purposes of reviewing or collecting the account. Reviewing the account includes activities related to account maintenance, monitoring, credit line increases, and account upgrades and enhancements.
- 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 consumerfinance.gov/learnmore.
To access the full Fair Credit Reporting Act, “Text of Rule”, click here
Complying with the FCRA
Unlike the official title of the Act, much of what is obtained for hiring consideration outside of the financial industry is not credit or financially related. FCRA regulates the collection and distribution of consumer credit reports, criminal background reports and more. Many employers that use consumer reports during the application process are already familiar with the FCRA’s stringent notice and disclosure requirements and the pitfalls that come with violations. FCRA class action lawsuits have impacted numerous organizations in various industries for allegedly failing to comply with notice and disclosure requirements and have resulted in million-dollar settlements.
What Should Employers Do?
Employers that use consumer reports during the hiring process should ensure that they are providing the most up-to-date FCRA forms to applicants. Additionally, before instituting any background check process, employers should consult with their counsel and be provided assurances from their selected consumer reporting agency to ensure their process is compliant with all state and local laws.
Know the difference in Membership and Accreditation.
Many consumer reporting agencies are members of The National Association of Professional Background Screeners (NAPBS). Companies (National and International) can join this association for an annual fee ranging between $600 -$7,500 per company. Members are provided with legal updates, learning opportunities and more.
The National Association of Professional Background Screeners offers an accreditation program for Consumer Reporting Agencies located in the United States. Governed by a strict and thorough set of professional standards of specified requirements and measurements, the Background Screening Agency Accreditation Program has become a widely recognized seal of approval bringing national recognition to an employment background screening-affiliated organization for its commitment to achieving excellence through high professional standards with accountability that results in continued institutional improvement.
The Background Screening Agency Accreditation Program provides a detailed process for evaluating and improving internal operating procedures that every consumer reporting agency, and their clients, benefit from. An accredited consumer reporting agency has made a commitment to uphold and deliver the highest level of industry standards for the critical areas
- Information Security
- Legal and Compliance
- Client Education
- Researcher and Data Standards
- Verification Services Standards
- Business Practices
For more information about the National Association of Professional Background Screener’s Membership or Accreditation, click here.
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