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Fair Credit Reporting Act -- a trap for the unwary

In a recent article, I noted how Minnesota's new "ban the box" law limits how private sector employers may check the criminal history of potential employees. Another trap for employers who conduct background checks is the Fair Credit Reporting Act.

The FCRA is a federal law that restricts how employers may obtain and use consumer reports and investigative consumer reports in connection with hiring and making other decisions about employees. For example, the law requires that applicants and employees must be notified in writing of the employer's intent to obtain such reports before they are obtained. This notice must be a "stand alone" document that contains only the disclosure.Minnesota law also requires that this notice must contain a box for the applicant or employee to check to indicate whether s/he wants to receive a copy of the report (which must be provided free of charge).

Other FCRA requirements include obtaining the applicant's or employee's signed authorization before requesting or obtaining consumer reports or investigative consumer reports, certifying FCRA compliance to the consumer reporting agency from whom the reports are obtained, and providing written notices to an applicant or employee both before and when adverse action is taken based in whole or in part on a consumer report or investigative consumer report. Along with the written adverse action notices, employers must also provide a form known as the Summary of Your Rights under the Fair Credit Reporting Act. The Federal Trade Commission adopted a new summary of rights form which employers must use effective January 1, 2013.

Of course, the FCRA also has detailed definitions of what is a "consumer report," "investigative consumer report," "consumer reporting agency," etc.

The consequences for non-compliance with the FCRA can be steep, for individuals may bring private lawsuits against employers who violate the law. In addition, certain federal and state agencies may seek injunctive relief and penalties. Criminal sanctions are also possible if an employer obtains information from a consumer reporting agency under false pretenses.

Obtaining credit information can be valuable tool for screening applicants and employees, especially if the job at issue involves financial management or oversight. However, employers obtaining consumer reports and investigative consumer reports must strictly comply with the FCRA and any of its state counterparts.

For more information about this article, please contact me at alexandriamnlaw.com or taj@alexandriamnlaw.com.

The comments posted in this blog are for general informational purposes only. They are not to be considered as legal advice, and they do not establish an attorney-client relationship. For legal advice regarding your specific situation, please consult your attorney. Copyright 2014 Swenson Lervick Syverson Trosvig Jacobson Schultz, PA

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