Executive Summaries » FCRA Compliance Moves up the To-Do List

FCRA Compliance Moves up the To-Do List

December 3, 2014

The Fair Credit Reporting Act (FCRA) is the federal law that regulates the exchange of credit reports between credit bureaus and lenders, but it also regulates the informational exchange between employers and “consumer reporting agencies” (CRAs) that provide consumer reports. The obligations that the FCRA imposes on employers are triggered not only when an employer orders a credit report, but also when they order virtually any type of report from a CRA. For decades, lawsuits under the FCRA primarily targeted credit reporting agencies and lawsuits against employers were rare, but since early 2014 approximately 30 FCRA class-action lawsuits have targeted employers. These actions cut across all industries, including retailers, restaurant chains, theater chains, manufacturers and transportation companies.

Solo practitioners and non-profit groups with experience in the FCRA’s requirements routinely team with well-known wage-and-hour class-action firms to file these lawsuits. The FCRA allows an applicant or an employee to sue an employer for “negligently” or “willfully” failing to comply with the FCRA, with a two-year statute of limitations that may be extended up to a maximum of five years.

Corporate counsel should educate key stakeholders to escalate issues involving potential adverse actions for background-check related reasons. They should also consider arranging for a privileged review of background check forms and procedures, establishing written background check policies and implementing procedures to help ensure that adverse action notices are not sent to applicants or employees before a certain waiting period (e.g., five business days).

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