Reminder: New Fair Credit Reporting Act "Summary of Rights" Must Be Used

January 29, 2013

Employers who engage third parties to perform background checks on employees or job applicants must provide the employees/applicants with an updated "Summary of Rights" form pursuant to new Fair Credit Reporting Act ("FCRA") requirements, which took effect on January 1, 2013.  The form is available here, at "Appendix K to Part 1022 -- Summary of Consumer Rights."

The revised form reflects the change in the agency responsible for administering the FCRA.  In 2010, President Obama transferred authority to administer the FCRA from the Federal Trade Commission ("FTC") to the Consumer Financial Protection Board ("CFPB").  The new form directs employees/applicants to contact the CFPB or to visit the CFPB's web site (instead of contacting the FTC or visiting the FTC's web site) for more information about their rights under the FCRA.

In addition to the recent changes, employers should note that the other long-standing requirements of the FCRA, including providing a written disclosure that a consumer report may be obtained for employment purposes and obtaining a written authorization to procure the report, remain in effect.  With regard to the written disclosure and authorization, employers should be aware that the U.S. District Court for the District of Maryland ruled last year, in Singleton v. Domino's Pizza, that it is a violation of the FCRA for an employer to include a liability release in its disclosure document.

Prior to obtaining a consumer report under the FCRA, an employer is required to provide the employee or applicant with a clear and conspicuous disclosure "in a document that consists solely of the disclosure."  The employer may, under the statute, include the written authorization in the disclosure document, but the statute does not expressly permit any other provisions to be included in the disclosure document.

In Singleton, the employer's disclosure document contained three paragraphs:  (1) disclosure of the employer's intent to obtain a consumer report; (2) the employee's/applicant's written authorization for the employer to obtain the report; and (3) the employee's/applicant's release of "any and all liabilities, claims, or causes of action in regards to the information obtained from" the consumer report.  The court ruled that the inclusion of the liability release in the disclosure document violated the FCRA's mandate that the disclosure be made "in a document that consists solely of the disclosure."

Although the U.S. District Courts in New York are not necessarily bound by the Singleton decision, there is a risk that the U.S. District Courts in New York may rely on Singleton as persuasive authority and may interpret the FCRA in a similar way.  Accordingly, employers in New York would be well-advised to limit the disclosure document only to an expression of the employer's intent to obtain a consumer report and the employee's/applicant's authorization to procure the report.  Any releases or other information should be contained in separate documents.