Credit Reports, Employers' Use of

As of September 30, 1997, tough new rules go into effect regarding employers’ use of credit reports for hiring and promotion purposes. These new rules resulted from recent amendments to the Fair Credit Reporting Act.

Employers that want to obtain a credit report as part of their hiring or promotion procedures must comply with the following requirements: 

• The company must first inform the job applicant via a separate notice written in "clear and conspicuous language," of its intention to secure a credit report.
  
• The employer must secure the applicant’s written authorization to obtain the credit report. The written authorization form should also include the applicant’s specific consent to the credit bureau’s release any medical information that may be contained in his/her consumer report. Otherwise, the consumer reporting agency will not be able to release any reports that contain medical information. 
  
• When ordering the credit report, the company must certify to the credit bureau that it has properly notified the applicant. Also, the company must certify to the credit bureau that if the company takes any adverse action based on the credit report, the company will give the applicant a copy of the credit report and a "Summary of Consumer Rights." The credit bureau is required to furnish a copy of this "Summary of Consumer Rights" with each credit report ordered for employment purposes. 
  
• Before taking any adverse action (for example, denial of promotion or employment) on the basis of information contained in the credit report, the employer must give the applicant a copy of the credit report and a "Summary of Consumer Rights." The employer must also advise the applicant, either verbally or in writing, of his/ her right to obtain a free copy of his/her credit file from the reporting agency, if the applicant makes such a request within sixty days. The employer should tell the applicant to contact the credit reporting bureau directly regarding any disputes about the completeness or accuracy of any information that the credit bureau has furnished. The credit bureau, when informed that a person’s file contains wrong information, must investigate within thirty days. Then, the agency must provide the person with a written report of its investigation and a copy of the credit report if the investigation has resulted in any change.

The Federal Trade Commission, which is responsible for enforcing the Fair Credit Reporting Act (FCRA) for most industries, has issued three notices to help employers and credit reporting agencies comply with these new rules. These three notices are:

• a summary of consumer rights under the FCRA;
• a notice explaining the responsibilities of entities that regularly provide consumer reporting agencies with consumer report information; and
• a notice delineating the duties of anyone who uses information covered by the FCRA.

The FTC notices are available on the FTC’s Web site, which can be reached by clicking here.

Posted 9/15/97