Employers Must Update Background Check FCRA Forms by January 1, 2013

Businesses that use consumer credit reports and background checks to evaluate candidates and employees must begin using the Consumer Financial Protection Bureau’s new Summary of Rights form by January 1, 2013.

The Fair Credit Reporting Act (FCRA) requires employers both to disclose their intent to request consumer reports, and to obtain authorization for doing so. In addition, before taking any adverse action based on what they find in an individual’s report, businesses must provide the person with a copy of the report and a summary of his or her rights.

To note:

1. There’s no statutory penalty for businesses that don’t change their form:

“There is no per se penalty within the FCRA for failing to use the new form. However, employers that fail to comply with any of the Act’s requirements may be subject to penalties and fees, as well as lawsuits from applicants or employees.” (Nexsen Pruet)

2. … But there could be a significant cost if they don’t: 

“The FCRA has been growing in popularity among the plaintiffs’ bar as a source of litigation, including class litigation based on alleged technical defects in employers’ forms and procedures. Accordingly, employers should review their FCRA documents to ensure that this new form is in use beginning January 1, 2013 – and use this as an opportunity to make sure they are otherwise complying with the requirements of this federal law.” (Miller & Martin)

3. More FCRA regulations could be on the way:

“While the latest changes are technical, they may foreshadow that the CFPB is gearing up to undertake an active supervisory and enforcement role under the FCRA. Employers should be particularly aware of these developments as they occur, and they should review their policies and procedures to ensure continued compliance with the Act.” (Ballard Spahr)

The updates:

Additional reading:

Follow @CFPB_Watch on Twitter>>