Beginning January 1, 2013, employers conducting background checks will be required to provide an updated Summary of Consumer Rights form to comply with their obligations under the Fair Credit Reporting Act (“FCRA”).

Why were the forms changed?

The forms were modified to make clear that the newly created Consumer Financial Protection Bureau will assume responsibility for administering and enforcing the FCRA, a function that was previously handled by the Federal Trade Commission.

What Do Employers Need To Do By January 1, 2013?

Beginning on January 1, 2013, employers must provide the updated Summary of Consumer Rights under the Fair Credit Reporting Act to employees and applicants in various circumstances, such as when the applicant or employee will be subject to an investigative consumer report or sent a pre-adverse action notice. The updated Summary of Consumer Rights Form can be found here.

Although not directly affecting employers, consumer reporting agencies must also provide each user (including employers) with an updated Notice to Users of Consumer Reports and an updated Notice to Furnishers of Information. Copies of these forms can be found here and here.

What are the Penalties for Failure to Comply?

Employers who negligently or willfully fail to comply with any of the FCRA requirements (including providing the proper forms) may be subject to lawsuits brought by both applicants and employees. The damages associated with such claims depend on whether the violation is negligent or willful. Employers who negligently violate the FCRA are liable for actual damages, attorneys’ fees and costs. Employers who willfully violate the FCRA are liable for actual or statutory damages (ranging from $100 to $1,000), punitive damages, attorneys’ fees and costs.

Recommendations

By January 1, 2013, employers should provide employees and applicants with the updated Summary of Consumer Rights when such individual is subject to an investigative consumer report and with a pre-adverse action notice. In addition, employers should review their background screening processes to ensure compliance with the FCRA and applicable state laws.