The Dodd–Frank Wall Street Reform and Consumer Protection Act recently amended the Fair Credit Reporting Act (FCRA) to require employers taking an adverse action against an applicant or an employee – based in whole or in part on credit score information – to provide specific information to the affected applicant or employee. Beginning on July 21, 2011, any employer who used a credit score to make an adverse decision must provide the following information to the applicant or employee:
(i) notice that a credit score was used to make the decision not to hire or to terminate employment;
(ii) the actual credit score; and
(iii) the identity of the agency that provided the score so that the applicant or employee may contact the agency to correct any error.
Employers should keep in mind that the new notification requirements under Dodd-Frank and the FCRA amendment are in addition to the existing notification requirements under FCRA. Under the FCRA, an employer must already provide notice to an applicant or employee prior to taking adverse action that it has obtained a consumer report and provide the applicant or employee with a copy of the report and a written description of his or her rights under FCRA to seek a correction of erroneous information in the report. The FCRA also requires that the employer provide notice to the applicant or employee after it has taken any adverse action that such adverse decision was based in whole or in part on information contained in a consumer report, as well as: (i) the name, address, and phone number of the consumer reporting agency that provided the information; (ii) a statement that the consumer reporting agency is not responsible for the adverse action; and (iii) a notification that the individual has the right to dispute the accuracy of the report.
Employers should also be reminded that written consent is required under the FCRA before the employer requests any information from a consumer or credit reporting agency to be used in making an employment-related decision. There are very limited exceptions to this requirement.
In light of the upcoming date to comply with the new FCRA requirements, employers should take care to review carefully all decisions based upon credit scores, credit reports or background checks to comply with applicable law and consult with counsel where necessary.