Effective January 1, 2013, employers that are subject to the Fair Credit Reporting Act (“FCRA”) are required to use updated forms as part of the background check process. In general, only those employers who use a third party to conduct background checks are subject to the FCRA. There are three new forms, and they are available here (Appendices K, M and N to 12 CFR part 1022).
New Forms for Employers and Consumer Reporting Agencies
For employers, the most significant of these forms is entitled “A Summary of Your Rights Under the Fair Credit Reporting Act.” Employers must provide this Summary of Rights to applicants and employees when the employer (or its third-party background check company) issues a pre-adverse action letter and in certain other situations.
The other two forms are to be used by the third-party background check companies, which are also known as “consumer reporting agencies” under the FCRA. As to the second form, “Notice to Users of Consumer Reports: Obligations of Users Under the FCRA,” consumer reporting agencies are required to provide this notice to users of their services, including employers. As to the third form, entitled “Notice to Furnishers of Information: Obligations of Furnishers Under the FCRA,” consumer reporting agencies must provide this notice to providers of information in certain situations such as re-investigations where a consumer has disputed the information.
Consequences for Failing to Use New Forms
Failing to comply with the FCRA can subject employers to significant liability. Employers that negligent in their noncompliance with the FCRA may be liable to the employee or applicant for his or her actual damages and attorneys’ fees. If the employer’s noncompliance is found to be willful, then the employer can face additional penalties, including statutory damages ($100 to $1,000 per violation) and punitive damages.
Bottom Line
The advice for employers is not complicated: those that are subject to the FCRA should be using the new forms when conducting background checks.