September 20, 2018 | Category: Background Checks, Compliance

New Requirements for Employers Who Use Third-Party Background Check Companies

Beginning September 21, employers who use a third-party background check company to conduct background checks must use the updated Summary of Your Rights Under the Fair Credit Reporting Act.

Background checks, provided by a background check company, that investigate a job applicant’s or employee’s credit, criminal background, driving record, or education must comply with the Fair Credit Reporting Act (FCRA). Under the FCRA, these background checks are considered consumer reports and the background check company that provides the report is considered a consumer reporting agency. As such, under the law, employers and consumer reporting agencies are required to provide job applicants and employees the Summary of Your Rights Under the Fair Credit Reporting Act before the employer takes any adverse employment action as a result a background check.

The update to the form was prompted by the passage of the Economic Growth, Regulatory Relief, and Consumer Protection Act earlier this year. This law requires new language informing consumers of their rights to a security freeze.

If an employer is unable to begin using the updated form, the Consumer Financial Protection Bureau, the federal agency responsible for implementing the FCRA, will allow use of the previously approved form, but a separate page must be added that includes the new security freeze language to be compliant. The new security freeze language is as follows:

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.

The Consumer Financial Protection Bureau provided the updated form on September 12, 2018 — giving employers less than 2 weeks to become compliant. The updated Summary of Your Rights Under the Fair Credit Reporting Act can be downloaded from the Consumer Financial Protection Bureau’s website.