Fair Credit Reporting Act Archives - JDP

FCRA Lawsuit Involving CRA and Company Settled for $630,000

naomioverstreet — Mon, 06 May 2024 13:24:06 +0000

May 6, 2024

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.

Source

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Summary of Consumer Rights Update Deadline Approaches

marymae — Wed, 20 Mar 2024 10:28:08 +0000

March 20, 2024

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.

Source

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FCRA – Third Court Dismisses Claims of Injury Over Shared Disclosures

marymae — Fri, 01 Mar 2024 09:02:30 +0000

Feb 28, 2024

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.

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.

Source

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CFPB Releases Updated FCRA Summary of Consumer Rights

naomioverstreet — Tue, 06 Feb 2024 18:11:46 +0000

Feb 7, 2024

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.

Source

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FCRA Case Proceeds Despite Lacking Concrete Harm

marymae — Tue, 06 Feb 2024 15:08:42 +0000

Feb 6, 2024

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.

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.

Source

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5 Tips To Avoid FCRA Non-Compliance

naomioverstreet — Thu, 12 Oct 2023 13:15:50 +0000

5 Tips To Avoid FCRA Non-Compliance

October 12, 2023

In 1970, the Fair Credit Reporting Act (FCRA) took effect to ensure “the accuracy, fairness, and privacy of information in the files of consumer reporting agencies.” The Act gives consumers many rights, protects employees and job applicants, and regulates employers. As such, employers must ensure they comply with the FCRA.

Many people consider consumer reports as credit reports, but many other types exist. The Consumer Financial Protection Bureau (CFPB) describes a consumer report as “any written, oral, or other communication of any information by a consumer reporting agency.” However, the Bureau further specified that the report must concern the following to comply with the FCRA:

A consumer’s creditworthiness,
Credit standing,
Credit capacity,
Character,
General reputation,
Personal characteristics or
Mode of living

Furthermore, the CFPB cites specific uses when requesting or collecting this information. In some form, either entirely or partially, it must help determine the consumer’s eligibility in several ways. These criteria include the following:

Credit or insurance to be used primarily for personal, family, or household purposes;
Employment purposes; or
Any other purpose authorized under Section 604 (15 U.S.C. 1681b).”

Employers must comply with the FCRA when conducting background screening on employees.

FCRA Obligations for Employer

Here are some requirements employers must comply with when conducting a background check or taking adverse notice.

Disclosure

Employers must provide a disclosure before conducting a background check on an applicant or employee. The FCRA requires them to provide a written, stand-alone page stating the intention to acquire a consumer report. It must also clearly show that they may use it for employment-related decisions. The FCRA also requires the employer to receive the individual’s written consent to request or obtain the information.

Employers may obtain a background check once the applicant receives and signs the disclosure. This page can include minor additional information, such as “a brief description of the nature of consumer reports.” However, the Federal Trade Commission (FTC) advised employers not to do the following when adding to the disclosure:

“Don’t include language that claims to release you from liability for conducting, obtaining, or using the background screening report.
Don’t include a certification by the prospective employee that all information in his or her job application is accurate.
Delete any wording that purports to require the prospective employee to acknowledge that your hiring decisions are based on legitimate, non-discriminatory reasons.
Get rid of overly broad authorizations that permit the release of information that the FCRA doesn’t allow to be included in a background screening report – for example, bankruptcies that are more than ten years old.”

Notices

Employers intending to take adverse action must follow a specific process described by the FCRA. Adverse action includes refusing to hire an applicant or terminating a worker’s employment.

This process requires employers to notify the affected individual. This notification must include a copy of the consumer report used when making the decision. In addition, the individual must receive a “Summary of Consumer Rights” to ensure they understand the significance of this report and what they can do about the situation.

The employer must provide a reasonable time for the applicant or employee to respond. However, the FCRA does not specify a timeframe that employers must provide. According to the FTC’s Advisory Opinions, employers should allow at least five business days for applicants or employees to respond. This minimum can help mitigate potential lawsuits concerning this issue.

Employers taking adverse action must supply the individual with a final notice. It must include the consumer reporting company’s name, address, and phone number that provided the report. It must also contain a statement explaining that “the consumer reporting agency did not make the decision to take the adverse action and is unable to provide to the consumer the specific reasons why the adverse action was taken.” Finally, the person may receive a free copy of the report and dispute the accuracy and completeness if desired.

The FCRA’s disclosure requirements can lead to compliance issues. As such, the FTC offers adverse action forms that employers may use. However, the FTC’s form is optional. Employers may use their own, provided they include all required information.

Avoiding FCRA Violations

Failure to comply with the FCRA can lead to significant fines, penalties, or expensive lawsuits. Here are several steps employers can take to avoid FCRA violations:

Provide the required disclosures. Ensure it states that you will obtain a background check and includes a summary of their rights if you use a third-party background check company.
Do not include extraneous information. Avoid unnecessary details when stating that you will obtain a background check; irrelevant information has sometimes lead to lawsuits.
Obtain written consent for background checks. You must obtain written permission from an applicant or employee before acquiring a background check.
Supply a pre-adverse action notice if you intend to take an adverse employment action based on a background check. You must supply a copy of the background check report you used in making your decision with this report, as well as a “Summary of Consumer Rights Form.”
Provide a notice of adverse action before taking final adverse action. It must inform the individual that the CRA did not make the decision. It should also explain how they can obtain a free report from the CRA within 60 days of the adverse decision.

Conclusion

Businesses must comply with the FCRA, as violations have proven very costly. Fines for each violation can be from $100 to $1,000. In addition, a court can impose actual damages, punitive damages, and legal fees. The best way to ensure hiring compliance is to work with an experienced background check company. The right partner can help your company comply with the FCRA and other employment laws.

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.

Source

The post 5 Tips To Avoid FCRA Non-Compliance appeared first on JDP.

CFPB Proposes Expansions to the Fair Credit Reporting Act’s Scope

naomioverstreet — Fri, 01 Sep 2023 07:48:59 +0000

CFPB Proposes Expansions to the Fair Credit Reporting Act’s Scope

September 01, 2023

The Director of the Consumer Financial Protection Bureau (CFPB) recently announced plans concerning next month’s rulemaking. The CFPB intends to expand the Fair Credit Reporting Act (FCRA) to encompass additional categories of data.

Notably, it would expand activities that generate a “consumer report” and what constitutes these reports. These potential future regulations would significantly impact how companies treat and transmit related data. It may also affect which companies must comply with the FCRA’s strict rules.

The Expansions

In addition to the announcement, the Bureau released an FAQ concerning the forthcoming proposal. According to the two sources, the proposed rules would classify data brokers as consumer reporting agencies under the FCRA. This change would depend on the activities performed by the data brokers. As such, these brokers must comply with the FCRA’s standards for accuracy and dispute resolution procedures.

Another noteworthy expansion to the FCRA includes the Act now covering the definition of “credit header data.” The CFPB explained that credit header data includes “personally-identifying information like someone’s name, address, or Social Security number, which traditional credit bureaus hold. Much of the existing data broker market relies on credit header data purchased from the big three credit bureaus to create their individual dossier.”

As such, the rules would make selling this data illegal for reasons outside the FCRA’s “permissible purpose.” These include purposes such as employment applications, credit and insurance underwriting, or applications for government benefits.

The Cause

A core driver of these changes concerns the potential to abuse artificial intelligence and predictive decision-making tools. Under these changes, the FCRA’s regulations would encompass data brokers that disclose information used to train AI programs or power automated decision-making tools. One example included in the announcements included those used in employment. However, the effects of these changes would affect more than these purposes.

Many expect the CFPB to disclose more information concerning these proposed regulations next month. In addition, employers and other interested parties will have the opportunity to provide feedback on these expected changes. The final product of this rulemaking process could prove significantly different than those under current scrutiny.

The CFPB and other federal agencies have continued living up to their commitment to increasing focus on the FCRA and artificial intelligence relationship. As such, employers should review their policies concerning consumer reports and hiring tools using artificial intelligence to remain compliant. One way to ensure compliance is by partnering with a background screening company. A trustworthy provider will utilize their experience to provide compliant reporting and assistance in understanding responsible use of these hiring tools.

Keep your business up to date on new laws and regulations with JDP’s free news resources. Contact a sales rep today.

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Major Chain of Booksellers Settles Alleged FCRA Violations

naomioverstreet — Tue, 08 Aug 2023 18:55:35 +0000

Major Chain of Booksellers Settles Alleged FCRA Violations

August 8, 2023

A major chain of booksellers has agreed to a settlement to resolve a class action lawsuit. This suit addressed claims that it violated the Fair Credit Reporting Act (FCRA). According to the case, the bookseller willfully violated the FCRA by including extraneous language in its disclosures unrelated to consumer reporting.

The issues began when the named plaintiff applied to work for the bookseller. As part of the process, the bookseller sent the plaintiff an email linking to a website containing a consumer report disclosure. This link would authorize the employer to procure a background check. It included information found in a typical notice for performing a background check.

However, at the end of the disclosure, it included the following text:

“Please note: Nothing contained herein should be construed as legal advice or guidance. Employers should consult their own counsel about their compliance responsibilities under the FCRA and applicable state law. [A consumer reporting agency] expressly disclaims any warranties or responsibility or damages associated with or arising out of the information provided herein.”

The plaintiff viewed this disclosure and authorized the bookseller to acquire a background check. Later, the plaintiff filed a class action against the bookseller. The plaintiff claimed that it had willfully violated the FCRA by including these extraneous details unrelated to the performance of a background check. This inclusion violated the FCRA’s requirement that a disclosure be a standalone document free of irrelevant information.

The employer moved for summary judgment, arguing that a reasonable jury could not find its violation was willful. The bookseller asserted that it did not intend to include extraneous language. This inclusion resulted from a drafting error when it attempted to adjust a sample disclosure. According to the bookseller, it received this sample from the consumer reporting agency contracted to conduct its background checks.

The trial court agreed with the employer and granted the motion for summary judgment in its favor. However, the plaintiff appealed this motion. As such, a California Court of Appeal reversed this ruling. It found that the failure to catch this mistake could prove willful by a jury. It then remanded the case to the trial court for further proceedings.

Both parties in these proceedings have reached a settlement agreement to resolve the lawsuit. Under this settlement, the bookseller agreed to a lump sum payment of $600,000 to cover necessary expenses and to distribute among class members.

As this case illustrates, employers should focus on FCRA compliance in any background check program. The best way to help ensure compliance is to partner with a trusted background check provider. The right partner will utilize their experience to ensure compliance with FCRA, state, local, and federal regulations.

JDP makes background checks easy and reliable. Speak with a compliance expert today.

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