What is the FCRA?
The federal Fair Credit Reporting Act (FCRA) was enacted April
25, 1971. The FCRA created the first federal regulation of the consumer
reporting industry citing "a need to ensure that consumer reporting
agencies exercise their grave responsibilities with fairness, impartiality
and a respect for the consumer's right to privacy."
How does First Advantage keep you FCRA compliant?
When your company orders a consumer report, it is automatically
subject to certain provisions of the FCRA. A consumer report is
defined under the Act as "a written, oral or other communication
of any information by a consumer reporting agency bearing on a consumer's
credit worthiness, credit standing, credit capacity, character,
general reputation, personal characteristics or mode of living"
used in whole or in part as a factor in establishing a consumer's
eligibility for credit, employment, insurance or other benefits.
These are "records only" reports and do not include
interviews with current or former employers, schools or other institutions,
or business or personal references.
Certain provisions of the FCRA also deal specifically with your
responsibilities if you order a category of reports called investigative
consumer reports. An investigative consumer report is a type
of report containing information pertaining to the consumer's character,
general reputation, personal characteristics or mode of living
that is derived through personal interviews with friends or associates
of the consumer. For example if you order a reference check, then the report will
qualify as an Investigative Consumer Report.
How is First Advantage affected by the FCRA?
In addition to other information services, First Advantage supplies,
consumer reports to its customers. The following specific types of reports fall under the
provisions of the FCRA:
- Those used to evaluate a consumer's eligibility for credit for
personal purposes.
- Those used to underwrite insurance for personal purposes.
- Those used to evaluate a consumer's eligibility for prospective
employment.
- Those used to evaluate an employee for retention, promotion
or reassignment.
- Those used to evaluate a consumer's eligibility for a license
or other benefit granted by a government agency.
- Those used in connection with a business transaction involving
a consumer for a benefit used for personal purposes.
- Those used in connection with a court order or subpoena.
- Those used with written authorization from the consumer to whom
it relates.
- Those used regarding investors or insurers.
- Those used in response to state or local child support enforcement
agency.
The following are examples of services offered by First Advantage
companies which are not considered consumer reports and which are
not subject to the provisions of the FCRA:
- Reports on firms (including proprietorships, partnerships, corporations
or associations).
- Claim reports and damaged merchandise services.
- Third-party subrogation reports.
- First Advantage Commercial Specialists reports, Business and Government Services
reports and public record reports.
Report Content Limitations
The FCRA provides that consumer reports and investigative consumer
reports may not contain adverse information more than seven years
old, except that:
- Orders of relief (bankruptcies) may be reported for ten years.
- Convictions may be reported without limitation except in the following states
where the time limitation is still seven years: CA, KS, MO, MA, MT, NV, NH, NM, NY and WA
- There are no limitations on reporting adverse information when
a face amount of $150,000 of life insurance, or a credit transaction
of at least $150,000, or a job paying at least $75,000 per year
is involved.
Customer Requirements
When you order consumer reports or investigative consumer reports
for pre-employment purposes, you must certify the following to First Advantage:
- The purpose for requesting the report and use the information
only for that purpose.
- That you will comply with the disclosure requirements of the
FCRA (including adverse action provisions).
- That the information will not be used to violate any federal
or state equal employment laws or regulations.
- That consumer reports or investigative consumer reports will
not be ordered for employment purposes including retention or promotion without the
consumer's authorization.
Pre-Notification
If you order a consumer report for employment purposes, pre-notification is required.
Any time a consumer report or investigative consumer report is ordered for employment purposes,
you must notify
the consumer that such a report may be made and will include information
as to his/her character, general reputation, personal characteristics
and mode of living.
A consumer report notice must:
- Be in writing, mailed or otherwise delivered to the consumer
(e.g., notice may be provided via your application form; for employment purposes
only, you may not include the notice via your application
form because a stand-alone document is required).
- Be issued before the request for a consumer report.
- Provide written authorization before the request of a consumer
report.
An investigative consumer report notice must:
- Be in writing, mailed or otherwise delivered to the consumer
(e.g., notice may be provided via your application form;
- Be issued not later than three days after the report was requested.
- Include a statement that, upon written request, additional disclosure
will be made concerning the complete nature and scope of the investigation
(the information must be provided within five days of receiving
such a request from a consumer).
- Provide a written summary of the consumer's rights as prescribed
by the Federal Trade Commission.
Post-Notification
When you deny a benefit, either
in part or in whole, because of information contained in a consumer report
or investigative consumer report received from a consumer reporting agency,
you must notify the consumer of that fact and provide him/her with
the following:
- Copy of the report.
- Description in writing of the consumer's rights to obtain a
free report within 60 days to dispute any inaccuracies with the
consumer reporting agency.
- Reporting agency's name, address and telephone number.
- A statement claiming that the consumer reporting agency did
not make the adverse decision and can not provide the reason for
the adverse decision.
- Notification to the consumer of the adverse action which can
be orally, in writing or electronically delivered.
First Advantage has established consumer disclosure units to make it
easier for consumers to receive copies/information contained in
consumer reports. For credit disclosure, call 1-800-270-3435. For employment disclosure,
call 1-800-845-6004.
State Laws
Several states have passed legislation similar to the FCRA
and those provisions covering your responsibilities as a customer
are quite similar to those included in the federal law. However,
a few states have different pre- and post-notification provisions
that must be used with consumers in those states. Please check with
your legal counsel for analogous state statutes that may affect
your business.
Civil Liability
Failure to comply with FCRA requirements imposes civil liability
which includes:
- An individual who knowingly obtains a report without a permissible
purpose or under false pretenses is liable to the consumer for actual
damages with a minimum penalty $1,000.
- Any entity who willfully fails to comply with a provision of the
FCRA is liable to the consumer for actual damages. The penalty has
a minimum of $100 and a maximum of $1,000.
- Negligent noncompliance of FCRA requirements may result in liability
to the consumer of actual damages, costs and attorney's fees.
- Attorney's fees are available to the prevailing party in defending
motions brought in bad faith or for harassment purposes
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