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What is the Fair Credit Reporting Act?

The Fair Credit Reporting Act isn’t just about credit. The Fair Credit Reporting Act protects consumers from unfair practices imposed on them.

What is the Fair Credit Reporting Act?

ARTICLE BY: alliance2020

The Fair Credit Reporting Act protects consumers from unfair practices imposed on them.  It is a 108-page document listing regulations that must be followed by consumer reporting agencies.  There are many types of consumer reporting agencies including credit bureaus and specialty agencies.  Alliance 2020 is considered a consumer reporting agency as they sell information to companies to assist them in making employment decisions.

The Fair Credit Reporting Act isn’t just about credit. If your company uses background checks in making personnel decisions, the information report is considered a consumer report.  A consumer report is defined by the law as a communication report of any information by a consumer reporting agency (CRA) that discusses a person’s “credit worthiness, credit standing, credit capacity, character, general reputation, personal characteristics, or mode of living” which is considered as a factor in establishing their eligibility employment, or other reasons outlined in the law.


The FTC protects consumers by stopping unfair, deceptive or fraudulent practices in the marketplace.  They conduct investigations and sue companies that violate the law while developing regulations to educate consumers and businesses about their rights and responsibilities.  Although there are many other areas of responsibility overseen by the Federal Trade Commission, a major area of concern is protecting consumer’s rights that may be violated under the Fair Credit Reporting Act.


To avoid being the subject of a lawsuit, it is important to follow the FCRA regulations.  There are a few areas that have consistently been violated causing large settlements to be awarded to plaintiffs.

  1. If negative information is reported to your company on a candidate for employment, you need to provide the candidate with a “Summary of Their Rights under the Fair Credit Reporting Act”, send them a copy of the report and a pre-adverse action letter.
  2. After waiting a reasonable period of time, if the candidate questions any information in the report, they need to be referred to Alliance 2020, so that an investigation can be performed to confirm the validity of any incorrect information contained in the background screening report.
  3. If the negative information is confirmed and consequently the candidate will not be hired, or the candidate does not question the report, an adverse action letter must be sent to the candidate explaining that the information provided in the report is all or in part the reason for not offering them a job.
  4. Additionally, the failure to provide a “stand alone” Disclosure & Consent form prior to ordering a background screening report is in violation of the FCRA.

 

Currently, there is a class action suit against Starbucks for violating the FCRA in the US District Court for the Western District of Washington – Case number 2:16-cv-01951-RAJ.  Previously, Whole Foods, Home Depot, and Uber, to name a few additional companies, that the FTC has brought charges against for FCRA violations.

It is important to follow the guidelines of the FCRA to limit your exposure.

Alliance 2020, Inc.
Corporate Headquarters
304 Main Ave S, Ste 101
Renton WA 98057

Mailing: PO Box 4248
Renton WA 98057

425-271-8065
sales@alliance2020.com

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