The Federal Fair Credit Reporting Act (FCRA), a critical component of FCRA law, imposes several obligations on users of consumer reports procured for employment purposes, such as the requirement to engage in what is known as the "adverse action process." Katie Robinson, Senior Corporate Counsel, Global H.R. Research, a DISA company, recently presented a webinar for DISA covering the FCRA compliance steps, navigating the nuances of FCRA laws, and the adverse action process, followed by an insightful Q&A with attendees. Here's what you need to know from the Q&A.
Q&A From Webinar
1) Where do you get the Summary of Rights document from?
The Consumer Financial Protection Bureau (CFPB) is the agency responsible for maintaining the publication entitled "A Summary of Your Rights Under the Fair Credit Reporting Act," which is also called the "Summary of Consumer Rights." On March 17, 2023, the CFPB published an updated document. This version will replace the version published in October 2018. The English and Spanish versions of the Summary are available on the CFPB's website.
2) What is considered a consumer reporting agency? Would any decisions based on internal investigations, such as reference checks, polygraphs, or psychological testing, be required to follow the FCRA action?
The FCRA defines a consumer reporting agency (or CRA) as any person who, 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 to furnish consumer reports to third parties. Adverse action provisions required by the FCRA are only required when a decision is made either in whole or in part on the contents of a report, so decisions made entirely on internal investigations will not trigger the FCRA's adverse action notice requirements.
3) How does the pre-adverse action notice work for a staffing agency?
This will depend on how decisions are made between the staffing agency and their clients. If you are making a decision based on a decision that could affect someone's employment, you should consider compliance. Employers should consult their employment counsel to determine this answer based on their circumstances.
4) Is an email sufficient for sending a notice?
The FCRA doesn't name a specific method employers have to use to provide adverse action notices (other than that, the pre-adverse action notice must be in writing). Email is quickly becoming the industry standard for several reasons, such as companies moving to full remote workforces or because candidates are more likely to receive and check their emails sooner than they would for snail mail.
5) Do we still need to send the adverse action notice if the candidate revealed to us beforehand that they have a conviction and/or change of any kind?
If you decide solely based on what the applicant told you, it would not imply the process. However, if any part of your decision is made on the contents (or absence of contents) of a consumer report to any degree, the adverse action process is required.
6) Is ten days a reasonable amount of time?
It depends on the employer's circumstances. And will likely be fact-specific in every scenario. The FTC has only stated that five business days is a long enough waiting period in most cases.
7) If I send the pre-adverse action notice and they dispute, do we have to wait another five days to send the adverse action notice?
The only waiting period required is a reasonable time between the pre-adverse and adverse action notices.
8) Is there a "standard" for a decision-making "matrix"?
There isn't a standard across the board, at least not one we know. The most basic and frequently used "matrix" will say, "Clear reports can be marked as eligible. Any report that is not clear must be individually reviewed."
9) If we hired someone and allowed them to begin working until a finding on the report was verified, are we still responsible for supplying the report to them when adverse action is taken?
Yes. Even if the employee is originally hired and you decide to take adverse action based on a consumer report, you must go through the entire process. It could be reasonable to facilitate the process in less than five days under these circumstances, but again, this would be very fact specific.
10) What is the requirement for delivery - proof of delivery? Mail, certified, email, in-person?
The FCRA doesn't have a requirement regarding proof of delivery. Remember that it is much easier to prove you provided a notice when you have proof, such as a successfully transmitted email or affirmation from the candidate that they received the notice.
11) Is not allowing an employee to drive a company vehicle based on a motor vehicle report obtained via a background screen considered an adverse action if there is no other change to his employment circumstance?
Adverse action is "a denial of employment or any other decision for employment purposes that adversely affects any current or prospective employee." It's likely construed broadly because the law was designed to protect the employee. Case law states that even adverse actions that do not affect pay would still be considered an adverse action. Again, it is always recommended that you consult with your employment counsel to decide the best course of action based on your company's specific circumstances.
12) What is the difference between the adverse action of employment denial and employment withdrawal of offer?
Don't assume that there is a difference. If the decision to withdraw the offer is made in part or whole on a background check report, that decision will likely qualify as an adverse action under the FCRA.
13) If our third-party vendor sends the pre-adverse letter, do we also need to send it internally?
There's no need to send two notices. Just make sure you pay attention to your vendor to know this process is being conducted correctly.
14) Can the pre-adverse action notice be a standardized form?
There aren't any prohibitions under the FCRA. It's assumed that this will generally be the case.
15) When I receive a pre-adverse action email from DISA letting me know they are sending out a letter to my employee, do I need to let the employee know ahead of time?
Generally, there isn't a reason to give a pre-pre-adverse notice - just the one will do (unless you send an adverse notice later).
16) If we have out-of-state contractors, do we follow the state they will be employed or the state we operate in?
The FCRA is state agnostic. If you're dealing with state laws, each state will differ, so it's best to take the safest route and always consult with your employment counsel beforehand.
17) If a background check includes a felony conviction that conflicts with the statement on the employment application (attesting to no felony convictions) - we do not hire based on falsified employment application. Is this an FCRA issue?
It likely would be. If you are using the report in any way, even to compare it to another document or statement, you are using it at least in part to make your decision.
18) We send out pre-adverse and adverse action letters via U.S. certified mail and get about half returned unclaimed. If sent by U.S. mail, do we have to send it certified? Do we need proof of mailing?
Currently, there aren't any requirements to send via certified mail or other similar proof. The scenario described with letters being constantly returned is one of the main reasons we moved our process to email as the primary mode of communication.
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About DISA Global Solutions
Founded in 1986, DISA is the industry-leading provider of employee screening and compliance services. Headquartered in Houston, with more than 35 offices throughout the U.S. and Canada, DISA’s comprehensive scope of services includes drug and alcohol testing, background screening, occupational health, and transportation compliance. DISA assists employers in making informed staffing decisions while building a culture of safety in their workplace.