New FCRA Disclosure Notice Takes Effect Sept. 21

Roy Maurer By Roy Maurer September 21, 2018
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New FCRA Disclosure Notice Takes Effect Sept. 21

​Class-action lawsuits could await employers that don't update a commonly used notice required by the Fair Credit Reporting Act (FCRA) when conducting background screens.

The Bureau of Consumer Financial Protection has issued a revised model summary of rights disclosure notice. Employers must give the document to job applicants and employees who've had adverse action taken against them—such as not being hired or being disciplined or fired—based on a background check.

Specifically, the form titled "A Summary of Your Rights Under the Fair Credit Reporting Act" has been updated to include information about security freezes and fraud alerts, stemming from a law passed in May 2018 in response to high-profile data breaches.

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The notice generally informs applicants and employees of their rights to obtain and dispute information in background-check reports and to obtain credit scores. Employers can either use the agency's model form or their own substantially similar form.

"The model form must be provided in different circumstances … specific to employment screening," said Montserrat Miller, a partner in the privacy, immigration and government affairs practice groups at Arnall Golden Gregory in Washington, D.C. "For instance, the model form must be provided by background-screening companies to employers, as well as by employers to job applicants during the adverse-action process."

Lindsay Demaree, an attorney in the Las Vegas office of Ballard Spahr, explained that employers can still use the agency's form updated in 2012 (or a substantially similar form) to comply with the new requirements, so long as a separate page containing the security freeze and fraud alert information is attached. "While this compliance alternative can be used after the rule goes into effect, the bureau has advised that users should discontinue use of the older model forms published on Dec. 21, 2011," she said.

Employers should begin using the updated notice now to minimize legal risk and avoid any gaps in compliance with the new requirement, experts agreed.

"Improper use or nonuse of the summary of rights form by employers and consumer reporting agencies has been alleged as a basis for multiple class actions, so the risk of exposure from non-compliance is not hypothetical," said David Gettings, a partner in the Virginia Beach office of Troutman Sanders.

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