News

Background Investigations Require Revised Form Beginning in January 2013

The Consumer Financial Protection Bureau (CFPB) has taken over enforcement of the Fair Credit Reporting Act (FCRA) from the Federal Trade Commission (FTC).  As a result, beginning Jan. 1, 2013, employers must use updated Fair Credit Reporting Act (FCRA) notices to reflect the change. In 2011, after the passage of the Dodd-Frank Wall Street Reform and Consumer Financial Protection Act, the CFPB was created and given the responsibility of overseeing the regulations governing the FCRA.  Shortly after, the CFPB issued new regulations which, among other things, modified the Summary of Your Rights under the Fair Credit Reporting Act form that employers must use to notify employees and applicants of their rights.  There are no substantive changes to the form, other than the replacement of “FTC” with “CFPB.” The FCRA regulates employers who use third party organizations to conduct background investigations prior to or during employment.  According to the FCRA, before an employer may conduct a background investigation, the employer must obtain consent, in writing, from the applicant or employee, and must provide certain information including the reason for the investigation.   After the report is obtained, the FCRA requires employers to take additional steps when any adverse employment action is taken, such as refusing to hire an applicant or terminating an employee’s position because of information obtained in the report.  For example, prior to taking adverse action, employers must provide the applicant or employee with a copy of the background report and a summary of the individual’s rights under the FCRA.  After taking adverse action, the employer is required to provide, in writing, a second notice with information about the third party agency that provided the background information. For additional information on the new CFPB, visit www.consumerfinance.gov.