A hotel brand management company and consumer reporting agency (CRA) have reached a settlement agreement in a class action lawsuit. This agreement addressed how the two companies violated the Fair Credit Reporting Act (FCRA) when supplying and using background checks for employment. The settlement amounts to over $630,000 and will resolve claims by those subjected to consumer reports by the two companies during the claim period.

The Suit

The complaint against the companies revealed that the company violated the FCRA when requesting and using the CRA’s furnished consumer reports. For example, the employer failed to provide potential job candidates with a clear and conspicuous disclosure and written authorization before attempting to procure a consumer report. The company also allegedly failed to provide copies of any report and other required information before taking adverse employment-related actions based on the report.

Against the CRA, the class action makes similar complaints. Under 15 U.S.C. § 1681b(b)(3)(A)(i) -(ii), agencies must provide certain information before taking adverse action based on the contents of a consumer report. The complaint argued how the FCRA states, “in using a consumer report for employment purposes, before taking any adverse action based in whole or in part on the report, the person intending to take such adverse action shall provide to the consumer to whom the report relates . . . a copy of the report[.]”

As such, the suit claimed that the CRA failed to obtain suitable certification from the employer, written authorization, and, when applicable, a pre-adverse action notice. Under the FCRA, CRAs may furnish a consumer report for employment purposes only if the person requesting it certifies that it has complied with paragraph (2) and, when applicable, paragraph (3).

Clarifications

These paragraphs require those using consumer reports to provide suitable disclosure and written authorization for employment purposes. This step is necessary before receiving the report and before taking adverse action due to the information found in it. Allegedly, the CRA provided thousands of consumer reports for the employer without certifying FCRA compliance with the mentioned paragraphs.

In this settlement agreement, both companies maintained that they were innocent of the suit’s allegations. However, they agreed to pay $630,000 into a fund to distribute to eligible individuals.

According to the settlement, impacted individuals can receive a check worth up to $100; members of a subclass of the company could receive up to $200. The case automatically benefits all class members, though anyone may opt-out by May 20, 2024.

Disclaimer:

Information provided here is for educational and informational purposes only and should not constitute as legal advice. We recommend you contact your own legal counsel for any questions regarding your specific practices and compliance with applicable laws.

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Massachusetts legislators intend to pass legislation prohibiting employers from using credit reports for employment. As such, the Massachusetts House of Representatives recently passed a bill to amend the state’s consumer protection law. The bill is called “An Act Reducing Barriers to Employment Through Credit Discrimination” (H.1434) and will soon undergo review by the Senate. 

If passed into law, H.1434 would address employers’ requests for and acquired reports from consumer reporting agencies. In most cases, it would bar employers from obtaining a report with any bearing on an individual’s “credit worthiness, credit standing or credit capacity.” H.1434 includes background check providers and credit bureaus as consumer reporting agencies. In addition, employers cannot ask applicants or employees any questions about a report’s contents that could involve the above characteristics.

1. 1434 would also bar employers from using credit information for “employment purposes.” This ban includes considering applicants for employment and determining an individual’s suitability for retention, reassignment, or promotion. State law would consider violating these regulations as an unfair trade practice. As such, aggrieved individuals could qualify to recover attorney’s fees, costs, and double damages due to a willful or knowing violation.

The bill also provides some limited carve-outs for certain employers. For example, an employer may request and use a credit report for employment purposes after meeting either of the following conditions:

• Federal or state law, regulation, or the rules of a self-regulatory organization (as defined in 15 U.S.C. 78c(a)(26)) requires an individual to use a consumer report for employment purposes; or
• The position held or applied for by the employee or applicant requires national security clearance.

H.1434 also contains an anti-discrimination provision. This section bars employers from taking adverse action against a person. The bill specified protections for those who have or intend to:

• File a complaint against a violation of the new regulations;
• Testify, assist, give evidence, or participate in an investigation of a violation; or
• Otherwise, oppose a violation of the regulations.

Should the state Senate and governor approve and sign it, H. 1434 may take effect as early as January 1, 2025. The legislation would become the most restrictive provision in the U.S. for credit reports concerning employment purposes. Employers should note that the regulations still allow them to use consumer reports. It applies only to “true credit reports.” For example, the bill does not prevent them from running criminal background checks or motor vehicle record searches.

 Disclaimer:

Information provided here is for educational and informational purposes only and should not constitute as legal advice. We recommend you contact your own legal counsel for any questions regarding your specific practices and compliance with applicable laws.

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Employers and consumer reporting agencies (CRAs) should prepare to update their Fair Credit Reporting Act (FCRA) Summary of Consumer Rights. According to the Consumer Financial Protection Bureau (CFPB), employers must use the updated version starting March 20, 2024.

Employers must provide this form before taking adverse action based on background checks. Furthermore, the CFPB reminded employers to include the summary with every pre-adverse action notice. The new summary of consumer rights will consist of an English and Spanish version.

The form is “A Summary of Your Rights Under the Fair Credit Reporting Act.” It represents a critical step in the consumer reporting process. The CFPB published its intent to update the form in March 2023. The final rule that updated the form became public on March 17, 2023. Furthermore, the CFPB announced that it superseded the prior version, released in October 2018.

However, after publishing the final rule on March 17, 2023, the bureau discovered a significant typo. As such, the agency quickly released an updated version the following week. As of March 24, 2023, the CFPB has corrected the issue. This new form came with a March 20, 2024, deadline. The CFPB provided this timeline to ensure the bureau had enough time to release the official version and that employers had time to convert to the new form.

These forms are nearly identical in content. For example, the versions share the same file name. As such, employers should apply caution when working with these forms to ensure they use the correct version. The CFPB offered advice to help employers quickly realize which form is the latest. For example, they can look for page 4, item 3. This section mentions air carriers. Here, it should reference the “Assistant General Counsel for Office of Aviation Consumer Protection.” In the previous version released on March 17, 2023, the bureau unintentionally omitted the word “Consumer” in the item.

This example is the fastest and easiest way to check whether employers have the latest Summary of Consumer Rights. 

This publication included several revisions. For example, the form is now available on the CFPB website in English and Spanish. It also includes non-substantive revisions. These revisions involve updating information for several federal agencies and changes for outdated business types, such as “Federal Land Banks.” Other corrections in the Summary of Consumer Rights include technical corrections.

According to the CFPB, employers must include the Summary of Consumer Rights when sending a pre-adverse action notice. A copy of the individual’s background check must also accompany this form. This notice informs the individual that the company may dismiss their application due to information found in their background check. Furthermore, the CFPB reminded CRAs that they must also provide a Summary of Consumer Rights. This form is crucial when the CRA submits information from the individual’s file. Employers and CRAs must switch to the latest Summary of Consumer Rights by March 20, 2024.

Disclaimer:

Information provided here is for educational and informational purposes only and should not constitute as legal advice. We recommend you contact your own legal counsel for any questions regarding your specific practices and compliance with applicable laws.

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The U.S. Court of Appeals for the Third Circuit announced its findings for a case concerning Article III. According to the case, a company allegedly disclosed an individual’s personal information to an intermediary without proper authorization. 

According to the plaintiff, the issue began when they received a letter from the defendant. The defendant attempted to collect upon an outstanding debt for medical services through this letter. Though from the defendant, a third-party service printed and mailed the letter. The defendant provided the third-party mailing with the plaintiff’s name, address, and other personal information. According to the plaintiff, she did not consent to the defendant sharing her information. As such, she claimed the defendant violated the Fair Credit Reporting Act (FCRA). 

The plaintiff filed a class action complaint against the defendant in response to this alleged FCRA violation. She filed for herself and other Pennsylvania residents who received collection notices from the defendant through third-party mailing vendors. The plaintiff claimed she suffered stress and embarrassment, and the disclosures invaded her privacy and inflicted reputational harm.

However, the appeals court claimed this activity failed to establish Article III standing. As such, the Court has dismissed the case.

The defendant moved for dismissal for failure to state a claim with the district court. However, the Supreme Court did not consider this argument. The Supreme Court determined it lacked jurisdiction due to the finding that the plaintiff had failed to state a claim. The plaintiff appealed this decision, claiming she suffered concrete injury from the defendant disclosing her information to the vendor. The Court disagreed. 

The Third Circuit’s ruling drew inspiration from the Supreme Court ruling in a 2020 case. In this case, the plaintiff sought relief for intangible harms resulting from statutory violations. The Court found “that intangible harms can give rise to concrete injuries when they bear a close relationship to harms traditionally recognized as providing a basis for lawsuits in American courts.” However, the Third Circuit declared that the injury allegedly suffered by the plaintiff “is not remotely analogous to the harm caused by the tortious public dissemination of sensitive facts about another’s private life.” explained how the two did not equate.

Information shared between private intermediary parties without a likelihood of external dissemination cannot compare to a traditionally recognized harm that depends on the humiliation of public disclosure. As a result, the appellate Court upheld the district court’s ruling to dismiss the case.

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Information provided here is for educational and informational purposes only and should not constitute as legal advice. We recommend you contact your own legal counsel for any questions regarding your specific practices and compliance with applicable laws.

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In a unanimous decision, the U.S. Supreme Court announced its ruling on a Fair Credit Reporting Act (FCRA) case. This ruling allows individuals to sue the federal government for violations of the Fair Credit Reporting Act (FCRA) 15 U.S.C. § 1681. This decision may lead to an uptick in lawsuits against the federal government for FCRA violations.

The Case

The case that started this concerns an individual who received a loan from a division of the U.S. Department of Agriculture (USDA). According to the allegations, the plaintiff acquired and repaid a loan from the USDA. Despite the repayment, the USDA reported the loan as overdue. This action damaged the plaintiff’s credit score and ability to acquire loans at affordable rates.

The plaintiff reported the issue to a consumer reporting agency, which notified the USDA. The USDA failed to take “any action to investigate or correct” the problem. The plaintiff filed this lawsuit in answer, alleging that the USDA violated the FCRA. However, the USDA moved for dismissal by claiming sovereign immunity. The U.S. District Court for the Eastern District of Pennsylvania agreed and dismissed the lawsuit.

The Appeal

The Court of Appeals for the Third Circuit reversed this ruling after a request for appeal. According to the Court, the FCRA authorizes lawsuits to recover damages against “any person” for related violations. Among the many definitions of “person,” the FCRA includes “[any] governmental agency.”

The USDA requested a review of the decision with the Supreme Court. Granting it, the Supreme Court sought to resolve the conflicts between Circuits. Both parties agreed that the government generally possesses sovereign immunity. However, they disagreed about whether the FCRA waived this immunity. As such, the Supreme Court applied a “clear statement” rule to determine whether Congress expressly waived its immunity. This ruling allows for lawsuits when “the language of the statute [is] unmistakably clear.”

The Supreme Court Opinion

The Supreme Court found that the law provides this clear statement, waiving the federal government’s immunity. They based it on the definitions including “any governmental agency” and accompanying legislative text reaffirming this conclusion. Thus, the Court affirmed the Third Circuit’s ruling. According to the Court’s Opinion:

“The Executive Branch may question the wisdom of holding federal agencies accountable for their violations of the Fair Credit Reporting Act; certainly, the many and resourceful arguments it advances today suggest as much. But Congress’s judgment commands our respect, and the law it has adopted speaks clearly: A consumer may sue ‘any’ federal agency for defying the law’s terms.”

As of this ruling, consumers can now sue the federal government for certain violations of the FCRA. This clearly illustrates the importance of compliance with the FCRA’s provisions, especially for employers regarding background checks and other consumer reports.

Disclaimer:

Information provided here is for educational and informational purposes only and should not constitute as legal advice. We recommend you contact your own legal counsel for any questions regarding your specific practices and compliance with applicable laws.

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The California Civil Rights Department recently accused a major grocery company of violating the state’s law. According to the complaint, the company asked applicants if they had criminal records and rejected over 1,000. The Civil Rights Department remarked that this is the first suit of this type that it has filed since the law concerning criminal records took effect.

Director’s Statement

The department’s director made a statement to announce the lawsuit. In it, he stated that approximately 70 million Americans have a criminal record. As such, policies that discriminate against such people violate California law, do not make sense, and will result in lawsuits. The director included the grocery company’s suit as an example of such action. Allegedly, the grocery company illegally denied jobs to candidates with criminal records who were otherwise qualified. For this reason, the department is “taking them to court.” The lawsuit accused the grocery company of violating the Fair Chance Act.

Act Requirements

The Fair Chance Act took effect in 2018 despite opposition from businesses. However, the significant support from civil rights groups and law groups helped push it forward. The law affects employers with five or more employees. It bans them from asking about a job applicant’s criminal history before making a conditional offer of employment.

Employers may request a criminal background report after making a conditional offer of employment. This process also opens them to the option of rescinding the offer if the individual committed crimes related to the applied-for position. However, the employer cannot consider felony convictions older than seven years or misdemeanor convictions older than three. 

The employer must allow time for the applicant to respond, in writing, to the decision. Employers must consider the written answer before taking final action. In this case, the grocery company used the same job application as the grocery chain that owns it. This application does ask about applicants’ criminal records. 

The Application

The application states that California applicants do not need to disclose their criminal records. However, a following section discussed how applicants should not disclose overturned or sealed convictions. According to the lawsuit, this suggests that applicants should report convictions that were not sealed or overturned.

The suit also claimed that the grocery company did not describe what types of convictions disqualified applicants from employment or their right to object. Allegedly, the grocery company also improperly withdrew offers of employment over past convictions. For example, they denied applicants with past misdemeanor convictions for possessing marijuana in a state where it is illegal. They also rejected those with misdemeanors for excessive noise.

The Civil Rights Department’s lawyers commented on the correlation between these convictions and grocery store jobs. They claimed such records had no direct or adverse relationship with the job duties of these positions. For example, such records would not impact a grocery clerk. They cited this example because most denied applications over criminal records concerning this position.

Disclaimer:

Information provided here is for educational and informational purposes only and should not constitute as legal advice. We recommend you contact your own legal counsel for any questions regarding your specific practices and compliance with applicable laws.

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A class action lawsuit alleging Fair Credit Reporting Act (FCRA) and California law violations has reached a nearly half-a-million-dollar settlement. This lawsuit alleged that a background check provider had furnished records extinguished under California law. This case began when the defendant prepared a consumer report concerning the plaintiff, including criminal background information. 

Claims and Arguments

The defendant’s report claimed that the plaintiff had two misdemeanor convictions. Though true, the plaintiff argued that the court expunged both criminal records. The expungement happened before the defendant prepared the background check report. Due to the defendant providing multiple reports detailing this information, the plaintiff experienced repeated employment rejections.

The lawsuit claims that these reports were factually inaccurate. As such, the background checking company should not have included the expunged criminal record information in their report. The plaintiff claimed that the consumer reporting agency “failed to follow reasonable procedures to assure the maximum possible accuracy of the information it reported” about them.

The class action lawsuit claimed the background check provider violated the FCRA, the California Consumer Credit Reporting Agencies Act, Cal. CiV. Code § 1785 et seq. (“CCRAA”), and the Investigative Consumer Reporting Agency Act, Cal CiV Code § 1786 et seq. (“ICRAA”). These violations rendered many credit reports inaccurate, all of which the agency sold to third parties. These actions led to the claim of failing to thoroughly search publicly available information, such as expungement records, before preparing and selling background checks. 

The Court’s Decision

A federal court has provided preliminary approval for an FCRA settlement between both parties. This settlement would benefit all impacted individuals based on the following:

‘From the period of February 20, 2020, to February 28, 2023, all natural persons residing in the United States and its Territories: (a) about whom Defendant furnished a consumer report for employment purposes; (b)whose report contained one or more items of criminal record information relating to a record that had been (i) expunged, (ii) sealed, (iii) dismissed pursuant to California Penal Code § 1203.4, or (iv) otherwise extinguished from the public record; (c) who disputed information on their report; (d) where an amended report was issued; and (e) where the amendment of the report was related to the reporting of a criminal record(s) that, at some point before the resolution of the dispute, Defendant determined to be expunged, sealed, otherwise extinguished from the public record, or dismissed pursuant to California Penal Code § 1203.4.”

If approved, this settlement will require the background check provider to pay $487,000 to a settlement fund. This fund would pay for all the expenses associated with the litigation for the plaintiff, the class counsel, and the distribution among the class members.

Disclaimer:

Information provided here is for educational and informational purposes only and should not constitute as legal advice. We recommend you contact your own legal counsel for any questions regarding your specific practices and compliance with applicable laws.

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Earlier this month, the Consumer Financial Protection Bureau (CFPB) published an updated version of “A Summary of Your Rights Under the Fair Credit Reporting Act.” Many also know this crucial FCRA publication as the “Summary of Consumer Rights.” The CFPB’s website also provides Spanish and English versions of the Summary.

FCRA Requirements

Both consumer reporting agencies and employers must provide this Summary to employees and applicants. Providing this Summary ensures they comply with the Fair Credit Reporting Act (FCRA). In addition, employers must provide applicants with this Summary whenever they give an applicant a pre-adverse action notice.

The CFPB has issued this final rule to make non-substantive corrections. In addition, the agency included updates to the contact information of the CFPB and other Federal agencies mentioned in several regulations. Interested parties may find this information throughout Regulation V, which implements the FCRA. It includes the Federal agency’s contact information supplied with a “Summary of Your Rights Under the FCRA.”

The “Office of the Comptroller of the Currency (OCC); the Federal Deposit Insurance Corporation (FDIC); the National Credit Union Administration (NCUA); the Department of Transportation (DOT); the Surface Transportation Board (STB); the United States Department of Agriculture, Agricultural Marketing Service (USDA-AMS); the United States Small Business Administration (SBA); the Securities and Exchange Commission (SEC); and the Federal Trade Commission (FTC),” will also see corrections. Interested parties can find relevant information in Appendix A of Regulation B. The CFPB will also correct its contact information, found in Appendix D.

When to Expect the Change

The final rule will take effect on April 19, 2023. When it takes effect, it will also make various non-substantive changes in Regulation V. But, the mandatory compliance date for the amendments to Appendix K to Regulation V will be later on March 20, 2024, as stated in the final rule. Therefore, employers and CRAs must ensure they update their forms by March 20, 2024. However, employers and CRAs could delay changing their forms because the Summary has a typo that the CFPB has not fixed.

This change is a good example of how employment-related rules and forms frequently change. The best way to ensure your company stays up-to-date with changes related to background checks is to partner with a trustworthy background check company.

Disclaimer:

Information provided here is for educational and informational purposes only and should not constitute as legal advice. We recommend you contact your own legal counsel for any questions regarding your specific practices and compliance with applicable laws.

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The Appeals Court of Massachusetts has announced its decision for a case concerning Fair Credit Reporting Act (FCRA) violations. The court declared that the case may proceed despite the plaintiff admitting it had caused no harm. 

The Cause

As such, the class action lawsuit will proceed against her former employer. In this case, the plaintiff claimed a pre-hire background check had failed to comply with the FCRA disclosure requirements. According to the case, the plaintiff had previously applied for a position as an emergency technician for an ambulance company. 

The company required her to sign a disclosure form and authorize them to perform a background check. According to the forms, the check could include a credit history review. However, the plaintiff claimed the disclosure contained extraneous language. One example concerns a waiver releasing the employer from liability that could result from the background check.

The Lawsuit

The plaintiff worked for the employer for approximately a year. Allegedly, she left following claims of sexual harassment. She then sued the company for discrimination and harassment. This decision evolved into a putative class action claiming the employer willfully violated the FCRA.

The latter case claimed that the employer’s deficient disclosure form violated the worker’s privacy rights. Furthermore, it failed to inform the plaintiff about the background check. The employer responded to the allegations by moving the case to the federal court and requesting a move for dismissal. 

The federal court granted the move and remanded the case to the state court. Once again, the employer moved for dismissal due to lack of standing. This success inspired the plaintiff to appeal, which led to a three-judge panel reversing the decision.

This panel found that Article III restrictions do not limit state courts unlike their federal counterparts. The panel reminded both parties that a plaintiff may sue for a statutory violation under Massachusetts law. However, the plaintiff must prove that they have suffered an injury, a statute will allow them to recover, and the state’s area of concern covers the injury.

The panel determined that these standing requirements would cover cases where technical violations of the FCRA occur regardless of actual harm. In this case, the plaintiff allegedly did not receive FCRA-compliant disclosures. Because the FCRA details recovery methods, the plaintiff may sue under state law. As such, the panel vacated the judgment. This decision allowed the plaintiff to proceed with their claims in the lower court.

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Information provided here is for educational and informational purposes only and should not constitute as legal advice. We recommend you contact your own legal counsel for any questions regarding your specific practices and compliance with applicable laws.

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Jan 19, 2024

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