Critical: New Background Check Requirements

Employers who use a third-party background check company to conduct background checks must use a new, updated “Summary of Your Rights Under the Fair Credit Reporting Act,” beginning September 21, 2018. The Consumer Financial Protection Bureau, which is the federal agency responsible for implementation of the Fair Credit Reporting Act (FCRA), provided the updated form on September 12, 2018, giving employers only until September 21st to comply.

Background checks that investigate a job applicant’s or employee’s credit, criminal background, driving record, or education, and which are received from a background check company, must comply with the FCRA. Under the FCRA, these background checks are considered “consumer reports” and the background check company is considered a “consumer reporting agency.” The law requires employers and consumer reporting agencies to provide job applicants and employees the “Summary of Your Rights Under the Fair Credit Reporting Act” before the employer takes any adverse action against a job applicant or employee as a result of a background check.

The changes to the “Summary of Your Rights” form were precipitated by the passage of the Economic Growth, Regulatory Relief, and Consumer Protect Act in May 2018.  That law requires new language informing consumers of their rights to a security freeze.  The new model “Summary of Your Rights Under the Fair Credit Reporting Act” can be found here. If you are unable to begin using this new form by September 21, you can continue to use the previously approved “Summary of your Rights” form (i.e., from 2012), but you must add a separate page that includes the new language regarding security freezes.

The new language on security freezes is as follows, should an employer wish to continue using the 2012 form while supplementing the required information as will be required starting September 21:

Consumers Have the Right To Obtain a Security Freeze

You have a right to place a “security freeze” on your credit report, which will prohibit a consumer reporting agency from releasing information in your credit report without your express authorization.  The security freeze is designed to prevent credit, loans, and services from being approved in your name without your consent.  However, you should be aware that using a security freeze to take control over who gets access to the personal and financial information in your credit report may delay, interfere with, or prohibit the timely approval of any subsequent request or application you make regarding a new loan, credit, mortgage, or any other account involving the extension of credit.

As an alternative to a security freeze, you have the right to place an initial or extended fraud alert on your credit file at no cost.  An initial fraud alert is a 1-year alert that is placed on a consumer’s credit file.  Upon seeing a fraud alert display on a consumer’s credit file, a business is required to take steps to verify the consumer’s identity before extending new credit.  If you are a victim of identity theft, you are entitled to an extended fraud alert, which is a fraud alert lasting 7 years.

A security freeze does not apply to a person or entity, or its affiliates, or collection agencies acting on behalf of the person or entity, with which you have an existing account that requests information in your credit report for the purposes of reviewing or collecting the account.  Reviewing the account includes activities related to account maintenance, monitoring, credit line increases, and account upgrades and enhancements.