Federal Fair Credit Reporting Act (FCRA)

The FCRA directly affects areas as diverse as what information can be contained on a report, to what notifications to make to the subject prior to the criminal record inquiry.

Overview of The Fair Credit Reporting Act (FCRA)

Perhaps the “Fair Credit Reporting Act” is really misnamed. Perhaps it should be called the “Fair Credit and Employment Reporting Act.” The lack of “employment” in the title has contributed to the lack of understanding and knowledge of this law in employment screening. In general, the FCRA manages the relationship between the parties who are involved in informational transactions that fall under the Act. Usually, there are at least three affected parties:

  • The provider of the information
  • The subject of the information
  • The user of the information

Important Definitions Within the Act

A Consumer Reporting Agency (CRA) is “any person which, for monetary fees, dues, or on a cooperative nonprofit basis, regularly engages in whole or in part in the practice of assembling or evaluating consumer credit information or other information on consumers for the purpose of furnishing consumer reports to third parties, and which uses any means or facility of interstate commerce for the purpose of furnishing consumer reports.” 15 U.S.C. §1681b (f)

A Consumer Report is “any written, oral, or other communication of any information by a consumer reporting agency bearing on a consumer’s credit worthiness, credit standing, credit capacity, character, general reputation, personal characteristics, or mode of living which is used or expected to be used or collected in whole or in part for the purpose of serving as a factor in establishing the consumer’s eligibility for: credit or insurance to be used primarily for personal, family, or household purposes; employment purposes; or any other purpose authorized under section 1681b, §1681a(d)(1).”

Employment purposes, when used in connection with a consumer report means “ a report used for the purpose of evaluating a consumer for employment, promotion, reassignment or retention as an employee.” 15 U.S.C. §1681a(h)

The Purpose of the FCRA

The purpose of the FCRA is to facilitate the flow of essential information concerning an individual’s background, while at the same time protecting that individual’s privacy rights and minimizing the risks of inaccurate reports. This is accomplished through the imposition of statutory and regulatory safeguards imposed on CRAs and the users and providers of the information. The regulations are designed to ensure the accuracy of the information being provided.

A failure to comply with the FCRA’s requirements exposes the CRA as well as the CRA customer, to both civil liability, 15 U.S.C. §1681o. Unlawful obtaining of information may result in criminal penalties, 15 U.S.C. §1681q.

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