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Credit Check: Notification Requirements under the Fair Credit Reporting Act
Effective September 30, 1997, the federal Fair Credit Reporting Act was amended to add more specific notification requirements for employers who use credit reports in their employment decision-making processes. The amended FCRA requires that employers notify job applicants or existing employees before obtaining a consumer report. The notice must be clear, conspicuous and made in writing to the consumer on a document that consists solely of the disclosure. The consumer then must authorize the credit inquiry in writing. If denial of employment is due to the information in the consumer report, the employer has additional obligations.
Before denying employment based in whole or in part on the credit report, the employer must provide the applicant a copy of the report and a description in writing of the consumer's rights under the FCRA. If employment is denied due either wholly or in part to the information in any consumer report, the employer must notify the applicant, by oral, written or electronic means, of the adverse decision as well as the following:
- the name, address and phone number (including a toll-free telephone number) of the consumer reporting agency that made the report;
- a statement that the consumer reporting agency did not make the decision and is unable to provide the consumer with specific reasons for the decision;
- a statement of the individual's right to obtain a free consumer report on the individual from that agency if the request is made within 60 days after receipt of this notice; and
- a statement that the consumer has the right to dispute directly with the consumer reporting agency the accuracy or completeness of any information in the report.
Although the Fair Credit Reporting Act permits the use of credit checks, employers should exercise caution to closely monitor any credit inquiries and strictly limit the dissemination of credit information. Additionally, if the credit check indicates that the applicant has declared bankruptcy, the employer must comply with the federal Bankruptcy Act. The Bankruptcy Act provides restrictions on terminating or discriminating in hiring solely based on bankruptcy, with an exception when the position requires financial honesty and aptitude. Furthermore if the use of credit checks adversely affects women and minorities, under Title VII, an employer must be able to show business necessity for the credit check. Willful or negligent failure to comply with the Fair Credit Reporting Act subjects employers to civil liability, including punitive damages and attorney's fees.
The information contained in this article is not a substitute for legal advice. Individual questions should be directed to an employment law attorney.
© 2000 by Millisor & Nobil Co., LPA
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