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Are you 100 percent FCRA compliant?

When it comes to FCRA (Fair Credit Reporting Act) compliance, sometimes the devil is in the details. You’ve been diligent about following the rules regarding your employee background screenings and think you’re in compliance, but that may not be the case.

Over the past few years, we’ve seen numerous class action lawsuits calling out employers on technical details in fulfilling FCRA requirements, such as an employer using an outdated or incorrect disclosure form, not including a copy of a Summary of Rights with a pre-Adverse Action Notice, or failing to provide other legally required disclosures. For such violations or alleged violations, the settlements have been substantial—some of them in the millions.

Large FCRA settlement payouts include a $4 million settlement agreed to by the retailer Walmart and codefendant ChoicePoint in 2009.i In that lawsuit, plaintiffs alleged that Walmart took adverse action on employment applications before the plaintiffs had a chance to review consumer reports used against them or to review their statement of rights under FCRA. The consumer reports and statement of rights, the plaintiffs alleged, were not mailed to them by ChoicePoint (on behalf of Walmart) within a reasonable period of time, which resulted in them receiving the documents at the same time they received adverse action letters in the mail.

In another large class action settlement related to an adverse action claim, discount chain Dollar General agreed to a $4 million payout in 2014.ii That suit alleged that Dollar General took adverse action in hiring without providing applicants with a pre-Adverse Action Notice or without waiting the appropriate time after sending a pre-Adverse Action Notice before taking action. And in March 2015, Delhaize America, LLC, and Food Lion, LLC, agreed to pay $3 million to resolve a similar class action lawsuit.iii That lawsuit alleged that the supermarket chain operator failed to provide a stand-alone background check disclosure document in its application packet and, when terminating an employee based on an erroneous background report, failed to provide a required pre-Adverse Action Notice. It should be noted that, in all of the above settlements, the defendants denied any wrongdoing.

As the trend in FCRA lawsuits continues to grow, more and more lawyers well versed in wage-and-hour class actions are making it their business to look for any small detail that employers may have missed in complying with the FCRA—some even expanding their practices to do so. With standardized damages under the statute reaching $1,000 per violation and the expense of a good legal defense, the stakes can escalate quickly.

That said, even if you think your current FCRA compliance practices are in fine shape, it’s always a good idea to review and update your policies and procedures periodically to help reduce the likelihood of a potential lawsuit.

Frequently at issue are violations regarding adverse action notification. To bolster your adverse action process, make sure you:

  • order and use background reports that are validated at the source
  • mail both pre- and final Adverse Action Notices to the applicant or employee
  • send a pre-Adverse Action Notice before a decision is made that disqualifies the candidate based, in whole or in part, on any background check
  • include in the pre-Adverse Action Notice the consumer Summary of Rights required by the FCRA, any state-required disclosures, and a copy of the consumer report
  • allow the applicant sufficient time (generally accepted as a minimum of five business days) to review and dispute information appearing on his or her background report before sending the final Adverse Action Notice
  • include in the final Adverse Action Notice:
    • the contact information of the consumer reporting agency (CRA) providing the report
    • a statement regarding the applicant’s right to obtain a free copy of the report from the CRA if requested within 60 days
    • a statement of the applicant’s right to dispute information on the report directly with the CRA
    • a statement that the CRA had no involvement in the employer’s decision and cannot provide reasons behind the decision

To help, many employers work with vendors that supply background reports and handle adverse action notification. With so much on the line, make sure you’re working with the most qualified provider that makes your FCRA compliance a priority by verifying reports at the source and providing the option of an adverse action notification product that satisfies the FCRA’s specific and detailed requirements.

For more information, please read about ou Adverse Action Notification services or call 1-800-683-8553.

Brian George

Brian D. George, Esq., is compliance manager of the Verisk Analytics iiX unit, a premier provider of motor vehicle reports (MVRs) and preemployment screening services. His areas of specialty include FCRA, DPPA, HIPAA, COPPA and GLB legislation; information security and privacy (NIST, SOC, FISMA, ISO); and consumer reports and background checks. He holds CIPM and CIPP/US certifications from the IAPP and is also NAPBS FCRA certified. He has a bachelor’s degree in political science from Texas A&M University and received his law degree from Thurgood Marshall School of Law.

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i Beverly v. Wal-Mart, 2008 WL 149032 (E.D. Va. 2008) and Beverly v. Choicepoint, 2008 WL 582622 (W.D.N.C. 2008)

ii Marcum, et al. v. DOLGENCORP, INC. a/k/a Dolgencorp, LLC a/k/a Dolgen, LLC, d/b/a Dollar General, Case No. 3:12cv108

iii Jeneen Brown v. Delhaize America, LLC et al. Case No. 1:14-cv-00195

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