Fair Credit Reporting Act – An Employer’s Reading List

The Dodd-Frank Act amended Section 615 of the Fair Credit Reporting Act (FCRA) regulates the use of credit reports by employers evaluating both new applicants and employees under consideration for promotion or reassignment. For your reference, here’s how lawyers and law firms guide our thinking on the FCRA. 

Fair Credit Reporting Act For Employers:

Use of credit reports comes under increased scrutiny: NO CREDIT? NO PROBLEM! (The Sequel) (Constangy, Brooks & Smith, LLP):

“A credit report is considered a ‘consumer report compiled by a ‘consumer reporting agency under the federal Fair Credit Reporting Act. Accordingly, special procedures apply when employers obtain and use such reports to evaluate applicants for hire as well candidates for promotion, reassignment, or retention.” Read more»

Fair Credit Reporting Act Requirements Triggered by Use of Internet and Social Media Screening Services (Poyner Spruill LLP):

“There has been considerable debate regarding whether employers are bound to comply with the Fair Credit Reporting Act (FCRA) when using reports compiled by third parties of public information available on social networking sites. A May 2011 letter issued by the Federal Trade Commission (FTC) regarding Social Intelligence Corporation (Social Intelligence), a social media background screening service, has confirmed that employers must comply with the requirements of FCRA when using public information furnished by Internet and social media background screening services like Social Intelligence.” Read more»

Legal Challenges to Applicant Credit Checks (Davis Wright Tremaine LLP):

“Employers face rising criticism regarding their use of credit histories in hiring decisions. Civil rights advocates raise concerns that use of credit histories unfairly disadvantages certain segments of the population. Advocates for low-income individuals are concerned about the ‘Catch-22 for job applicants: One cannot re-establish credit without a job, and one cannot get a job with bad credit.” Read more»

State Regulation of Employer Use of Credit Reports:

Labor & Employment Department Alert – Connecticut Employers Beware: Credit Report no Longer Qualifier in Employment Decisions (Fox Rothschild):

“Connecticut employers that use credit reports in hiring and promotion decisions must now ensure that such use complies with the new legislation that prohibits employers from using information contained in an employee or prospective employee’s credit report, including credit balances and payment history, in making decisions. Connecticut is the sixth state to pass such legislation joining Hawaii, Illinois, Maryland (effective October 1, 2011), Oregon, and Washington.” Read more»

Connecticut And Maryland Act To Restrict Employers’ Use Of Credit Reports (Fisher & Phillips LLP):

“Two more states – Connecticut and Maryland – have joined Illinois, Oregon, Washington, and Hawaii, and several cities, in severely limiting employers’ ability to use a job applicant’s or current employee’s credit history or credit-related information. This affects decisions in hiring or promotions, as well as in determining compensation or other terms, conditions, or privileges of employment.” Read more»

Illinois Law Bans Credit as Employment Criterion: NO CREDIT? NO PROBLEM! (Constangy, Brooks & Smith, LLP) :

“A new Illinois law prohibits many employers from discriminating against employees or job applicants on the basis of credit history. The Employee Credit Privacy Act, which was signed by Governor Pat Quinn on August 10, 2010, and takes effect January 1, 2011, contains exceptions for the banking and insurance industries, among others, and for positions that involve certain levels of financial or other responsibility.” Read more»

Additional FCRA Analysis:

Federal Reserve and FTC Publish Final Credit Score Disclosure Rules (Morrison & Foerster LLP):

“The Dodd-Frank Act amends the Fair Credit Reporting Act (FCRA) to require companies that use credit scores to include those scores, and related information, in adverse action and Risk-Based Pricing Notices provided to consumers. This morning, the Federal Reserve Board (FRB) and Federal Trade Commission (FTC) published final rules to implement these provisions.” Read more»

InfoBytes, July 22, 2011 – A Weekly In-depth review of news & developments in the financial services industry (BuckleySandler LLP):

“On the eve of the transfer of primary enforcement authority for the Fair Credit Reporting Act (FCRA) to the Consumer Financial Protection Bureau (CFPB), the Federal Trade Commission issued a staff report that summarizes its interpretations of FCRA. The report, entitled ‘Forty Years of Experience with the Fair Credit Reporting Act incorporates many positions that the FTC previously took in its 1990 Commentary on FCRA (which the FTC rescinded when it released the staff report) and in staff interpretation letters. Of particular interest to the consumer finance industry….” Read more»

A brief history of the FCRA and the potential for new litigation after Dodd-Frank (Bradley Marcus / BuckleySander LLP):

“This article traces FCRA [the Fair Credit Reporting Act] from its beginnings, which focused almost exclusively on the dissemination and use of credit and other consumer reports, to its present central role in the financial services industry, and concludes by considering Dodd-Frank’s effects on FCRA’s future.” Read more»

FTC Rescinds FCRA Commentary in Handoff to CFPB (Morrison & Foerster LLP):

“Earlier this week, the Federal Trade Commission (‘FTC) withdrew its Statements of General Policy or Interpretations under the Fair Credit Reporting Act (‘FCRA), which includes the FTC’s Commentary on the Fair Credit Reporting Act (‘Commentary). … The FTC withdrew its Commentary and issued its staff report one day before the ‘Designated Transfer Date, the appointed day on which the Consumer Financial Protection Act (‘CFPA) became effective, and authority to enforce and administer the various consumer credit protection laws, including the FCRA, transferred to the new Consumer Financial Protection Bureau (‘CFPB).” Read more»

Adverse Action and Risk-Based Disclosure (Final Rules) (Jonathan Foxx):

“The Rules amend certain model notices in Regulation B (Equal Credit Opportunity), which combine the adverse action notice requirements for Regulation B and the FCRA, to reflect the new credit score disclosure requirements. If a credit score is used in setting material terms of credit or in taking adverse action, the statute requires creditors to disclose credit scores and related information to consumers in notices under the Fair Credit Reporting Act (FCRA).” Read more»

Dodd-Frank Act Increases Disclosure Requirements for Financial Institutions and Other Businesses Which Make Decisions Based on Credit Scores (Richik Sarkar / Ulmer & Berne LLP)

“One of the final rules amended certain model notices in the Equal Credit Opportunity Act’s (‘ECOA) Regulation B, combining the adverse action notice requirements for the ECOA and the FCRA to reflect the new credit score disclosure requirements. The other rule, issued jointly with the FTC, amended Regulation V (related to fair credit reporting) to revise the content requirements for risk-based pricing notices and to add related model forms that reflect the new credit score disclosure requirements.” Read more» 

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