Counting to Seven: The 7 Year Rule for Reporting Adverse Information on a Background Check
October 17, 2013
If you read the Fair Credit Reporting Act (FCRA) as much as I do (insert nerd joke here), you might know that it allows non-conviction criminal information to be reported for up to seven years. One question that occasionally comes up is, when does the clock start on the seven year count? According to a recent brief filed jointly by the Consumer Financial Protection Bureau (CFPB) and the Federal Trade Commission (FTC), your count may be wrong.
At the heart of the issue is the FCRA provision dealing with obsolete information that limits how far back a consumer reporting agency (CRA) can report adverse information in a background check. In a recent amicus brief filed in the U.S. Court of Appeals for the Ninth Circuit on October 4, 2013, Moran v. The Screening Pros LLC (Case No. 12-57246), the FTC and the CFPB tag team on the issue, saying that the clock starts when the adverse information is first filed or entered into the record.
In general, an adverse item of information is reportable only if it antedates the report by seven years or fewer. 15 U.S.C. § 1681c(a)(5). The report in this case, made in 2010, listed (among other items) a misdemeanor drug charge from 2000 that was dismissed in 2004. The lower court concluded that the drug charge could be reported for seven years from the date the charge wasdismissed. The FTC and CFPB are saying that the trial court decision was wrong—rather, as a result of a 1998 amendment to the FCRA, the seven year reporting period for the dismissed drug charge should have started on the date of the charge and therefore ended in 2007.
Original FCRA Language
In the original FCRA, “[r]ecords of arrest, indictment, or conviction of crime” were reportable for seven years, starting at the “date of disposition, release, or parole.” The amendments to the FCRA in 1998 deleted this paragraph. The amendment moved “records of arrest” to paragraph (a)(2), which now limits the reporting of “[c]ivil suits, civil judgment, and records of arrest” to seven years “from date of entry,” 15 U.S.C.§ 1681c(a)(2). The agencies argue that the adverse event in this case is the charge—not the subsequent dismissal of the charge:
“the dismissal is not an adverse item that starts its own seven-year reporting period. It is simply the disposition of a truly adverse item, the underlying criminal charge.”
The old rule from the original FCRA is still being followed by some. Interpretation of the amendments has not been crystal clear, and commentary and interpretations by the FTC over the years have muddied the waters.
While the court has yet to rule in this case, everyone can agree that the 1998 amendment removed criminal convictions altogether from the restriction on reporting obsolete information. So the FCRA has no time limitation on reporting criminal convictions. However, some states have limitations on the length of time records may be reported. In addition, many employers limit the use of older convictions for other, non-FCRA reasons. The use of older convictions may not pass the scrutiny of the Equal Employment Opportunity Commission (EEOC) for being job related and consistent with business necessity. The EEOC guidelines state that an employer must consider the amount of time that has passed since the offense was committed when deciding whether to use the information in an employment decision.
So what does it all mean? A few quick take-aways:
- Employers (and landlords) should review your policies on using non-conviction information. If you want to consider records of arrest resulting in dismissals and other non-conviction type records, you should check with your background screening provider to see how the time is being calculated, and take into consideration state law restrictions.
- Employers should also consider how older records are relevant to specific positions. The EEOC guidance says that employers must consider the time that has passed since the offense was committed and determine whether the offense is relevant to the job. If older offenses are important to you, document the resons why in the job description and policy.
- CRAs should review their practices on the reporting of dismissals pursuant to section 605(a).
This brief certainly shows which way the wind is blowing with the CFPB and the FTC, and may lead to future rule-making on this subject. If you would like a copy of the brief, please send a request to email@example.com, and as always, I am interested to know what you think of the FTC/CFPB position.