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FTC Takes Action Against CRA's Using Background Checks in Violation of FCRA

Posted by admin on December 19, 2012

congressThe FCRA includes significant protections relating to the use of consumer reports for employment purposes, and 2012 proved the FTC is committed to using their resources to ensure that job applicants, employees, and consumers are protected.

The FTC testimony describes some of the legal rights and obligations prescribed by the FCRA when consumer reports are used for employment purposes, including the following:

  • CRAs must have reasonable procedures to assure maximum possible accuracy of reports;
  • CRAs must notify employers of their obligations under the FCRA;
  • Employers have to obtain the written consent of applicants and employees before using consumer reports for employment purposes;
  • Employers must provide notice to applicants and employees along with a summary of their rights under the FCRA before taking an adverse action against them based on a consumer report; and
  • Consumers have the right to obtain a copy of their consumer report and dispute erroneous or incomplete information with the CRA.

The testimony highlighted law enforcement and education efforts by the FTC in the area of employment background checks. In August 2012, the FTC fined a leading employment background screening company for $2.6 million for providing reports containing inaccurate information and failing to comply with FCRA dispute provisions.

In June 2012, the FTC took action against a data broker that compiled and sold detailed information profiles on millions of consumers, which resulted in a settlement that included $800,000 in civil penalties. The FTC alleged that the company failed to take reasonable steps to ensure that the reports sold would be used only for purposes allowed by law, ensure the reports were accurate, and inform report users of their FCRA obligations.

With the Consumer Financial Protection Bureau (CFPB) acquiring rule-making and enforcement powers over the FCRA, we are still waiting to see if jurisdiction of background checks will be extended. Currently, Congress has specifically exempted background check firms from being supervised by the CFPB, since a background report is not a financial product. Given the recent modifications, we may see changes from the CFPB in the future. Employers are encouraged to stay current with regulations, and using our services will keep your HR Department FRCA compliant.  

Click below to find out if you're HR Department is FCRA compliant.

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Topics: HR Compliance, Background Checks, Lawsuit, FTC, FCRA

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