EmployeeScreenIQ Blog

A few days ago the Federal Trade Commission released some inaccurate information to consumers regarding criminal background checks.  In an excerpt:

Your credit report has information about where you live, how you pay your bills, whether you’ve been sued or arrested, or have filed for bankruptcy. Credit reporting companies sell the information in your report to employers, creditors, insurers and other businesses that, in turn, use it to evaluate your applications for employment, credit, insurance, or renting a place to live. Employers also are allowed to use credit reports to evaluate an employee for retention, promotion or reassignment. That’s why it’s important to review your credit report periodically and to make sure the information it contains is accurate, complete and up-to-date. Your credit report is available to you for free, once every 12 months from each of the three nationwide credit reporting companies, if you ask for it.

Most of the above information is true, however the part about arrests and what a credit reporting agency even does is misleading.  I believe the author has confused  the difference between a credit reporting agency and a consumer reporting agency.  A credit reporting agency would be a company such as Equifax, Experian and Transunion, companies that are in the business of selling credit reports.  A consumer reporting agency (as defined by the Fair Credit Reporting Act) would be a company such as EmployeeScreenIQ or any full member of the National Association of Professional Background Screeners (NAPBS).  These Consumer Reporting Agencies (CRA’s) would in fact provide the other information the article refers to.  The article however does lend some good advice to consumers but should be amended to provide the distinction described above.  For the full article click here!

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Reporting Agency Settles Fair Credit Reporting Act Charges

A nationwide specialty consumer reporting agency that provides casinos credit reports used to assess customers’ eligibility for credit and check cashing will pay $150,000 to settle Federal Trade Commission charges that it violated the Fair Credit Reporting Act (FCRA), FTC officials said today.

Central Credit LLC, according to FTC officials, failed to inform casinos that use its credit reports of their legal obligations under the FCRA – such as providing adverse-action notices to consumers when credit is declined or a check is not cashed. It also allegedly failed to inform companies that furnish information for credit reports of their legal obligation to provide accurate information about consumers.

Central Credit further failed to inform consumers of their rights under FCRA, such as the right to obtain a free annual credit report. Finally, the company did not establish a streamlined process for consumers to request free annual credit reports, including publishing a toll-free number and providing clear instructions about how to request a free report.

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Two companies have agreed to pay $77,000 in civil penalties for failure to provide pre-adverse and adverse action notification to job applicants and existing employees that were either not hired or terminated due to information contained on their background checks.

See Settlements:

United States v. Quality Terminal Services

United States v. Rail Terminal Services

The Fair Credit Reporting Act (FCRA) requires such notification and the Federal Trade Commission (FTC) is responsible for enforcement.  Under the FCRA, employers are responsible for:

• provide the subject of the background check a copy of their report
• tell the candidate the Consumer Reporting Agency (CRA) that provided the report
• inform the candidate that the CRA did not make the hiring/firing decision
• notify the candidate of their right to a free copy of the report and their ability to dispute the findings

See links below for examples of compliant Pre-Adverse and Adverse Action Letters:

Sample Pre-Adverse Action Letter

Sample Adverse Action Letter

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When denying employment based on the results of a background check conducted by a Consumer Reporting Agency (CRA), the Fair Credit Reporting Act stipulates that the employer follow very specific adverse action procedures set forth in sections 604(b) and 615(a).  Two companies were apparently not well versed in these rules and ended up with a combined fine of $77,000.  That’s a big chunk of change – struggling economy or not. 

Our recommendation:  Employers should brush up on their obligations as users of consumer reports and speak with their legal department to ensure compliance. 

For release: 08/11/2009

Two Companies Pay Civil Penalties to Settle FTC Charges; Failed to Give Required Notices to Fired Workers and Rejected Job Applicants

Two companies that fired workers and rejected job applicants based on background checks without informing them of their rights under the Fair Credit Reporting Act (FCRA) have agreed to settle Federal Trade Commission charges that they violated federal law. The settlements require the defendants to pay $77,000 in civil penalties and bar future FCRA violations.

Employers often conduct background checks and seek employees’ and job applicants’ credit records, criminal histories, and other background information from a consumer reporting agency (CRA) such as a credit bureau or background screening company. The FCRA requires that before taking adverse employment actions based on these consumer reports – for example, firing employees or denying job applications – employers must provide the employees or applicants with a copy of the report, identify the CRA that provided it, notify them that the CRA did not make the adverse action decision, and inform them that they have the right to obtain a free copy of the report from the CRA and dispute its accuracy.

According to the FTC’s two complaints, both defendants contracted with a CRA to conduct background checks including criminal record reviews for employees and job applicants, and made hiring and firing decisions based on those background checks. The companies allegedly failed to provide the employees and applicants with pre-adverse action notices and adverse action notices as required by the FCRA.

The settlements require Quality Terminal Services, LLC and Rail Terminal Services, LLC to pay $53,000 and $24,000 in civil penalties, respectively, and to provide the FCRA-required notices in the future. The settlements also contain record-keeping and reporting provisions to allow the FTC to monitor compliance.

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It appears that  HR 3149 was introduced yesterday and Referred to Committee.  HR 3149 is a bill set to amend the Fair Credit Reporting Act (FCRA) to prohibit the use of consumer credit checks against prospective and current employees for the purposes of making adverse employment decisions.  EmployeeScreenIQ and EmployeeScreen University have written about this topic many times in the past.  As an industry, pre-employment credit reports are only suggested to be used when necessary and only for the responsibilities of that particular position.  In fact, the EEOC and FCRA already have provisions that the adverse information can only be used if it fits within the scope of the job. Most background screening programs only impliment this type of check as part of a much broader search.

Section three of the bill provides some exceptions but does not take into account most of them.  We suggest you spend some time reading this bill and write your congressperson to oppose it.  We agree the intent of this bill is to get more people to work.  However, as with most legislation, there are some unintended consequences.  There must be provisions for positions that could be negatively effected by a person with a poor credit history.  This 111th Congress has a horrible track record already for not even reading bills before voting.  Reach out and make a difference, make them read it, make them amend it!

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Marketwatch, one of the leading internet portals for financial information is reporting that less than one third of US Banks will be ready to meet the new “Red Flag” regulations in November.

With the November 1, 2008 compliance deadline looming, new research from TowerGroup finds that many US banks have mistakenly considered compliance with the “Red Flags Rules,” as they are known, merely an administrative exercise — and as a result, most will need to take rapid action to meet the more stringent regulatory demands.

Last month Attorney Pamela Devata wrote a guest article for employeescreen University to help prepare employers for this looming deadline.  The Fair and Accurate Credit Transactions Act of 2003 (FACTA) have specific directives for users of consumer information that are aimed at uncovering and preventing incidents of identity theft. These new regulations go into effect on November 1, 2008 and require the creation of a number of new policies and procedures for specified entities. Some of the regulations apply to all users of consumer reports, where others are specific to financial institutions and creditors.

According to Pam:

FACTA or the FACT Act as it is sometimes referred to went into effect in December 2003 and amended the federal Fair Credit Reporting Act (FCRA) in a number of ways. As it relates to identity theft prevention, FACTA instituted a procedure to help users of consumer reports combat identity theft by creating a notion of “red flags” when identity theft was suspected. In FACTA, a “Red Flag” is defined as a pattern, practice, or specific activity that indicates the possible existence of identity theft. A “user” of a consumer report includes entities such as employers who obtain consumer reports for the purpose of making employment (hiring, promotion, firing, etc.) decisions, as well as financial institutions, and granters of credit who use the information contained in consumer reports to issue credit cards, loans or mortgages, and other such activities.

The moral of this story?  We are ready, are you?

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Historically educators saw their profession as a “gentleman’s profession” held to a higher standard than others.  Above suspicion, they felt background checks were below them and insulted by the gesture.  We have seen similar stories as recent as last month.  This article shows tremendous support for the practice and an acknowledgment of previous fears.  We know there is a requirement of accuracy under the FCRA, apparently one experience in their forum was less than stellar.

An article from the Chronicle of Higher Education

Criminal-Background Checks: An article from the Chronicle of Higher Education

Criminal-background and credit checks are becoming a common element of faculty and administrative searches. Many states, and an increasing number of private colleges, are requiring background checks prior to or as part of job offers. My university added them this year, and thus we have been navigating in new waters as we deal with candidates during the offer process.

A certain amount of griping has ensued. One of the clearest vestiges of academe’s history as a “gentleman’s profession” is the idea that we, as academics and holders of advanced degrees, are somehow above suspicion, and thus requiring a background check is insulting and degrades us as professionals. That sentiment is certainly understandable, as the presence of a background check is prima facie evidence that candidates are not being taken at their word.

The paradox, of course, is that only those whose word is not good get caught by a background check. I have been around long enough to know about cases where an impostor has gotten an academic job (easily avoided by the now almost-universal requirement for official transcripts sent directly to the employing institution) or where someone with a criminal record has been hired.

In today’s litigious atmosphere — and, more important, as part of our obligation to students, parents, and other constituencies — transcripts and background checks are a fair way to avoid potential hiring disasters.

However, there is another side of this issue. When an institution has a policy requiring background checks, that policy entails that whoever performs those checks be held to absolute standards of accuracy. A recent case discussed in The Chronicle’s Forums described a candidate’s experiences being offered a position contingent on a background check which later came back with negative information that led to the withdrawal of the offer. The information turned out to be wrong, and it fell to the candidate to correct the record, supplying numerous documents and affidavits certifying the candidate’s innocence. The offer was then reinstated only to be withdrawn again, apparently by the institution’s human-resources office. Why? Because the candidate had protested the negative finding.

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Something always bothered me about these commercials, I knew I smelled something fishy! Company CEO, Todd Davis dared consumers to steal his identity. Mr. Davis took this dare a step further, he put his Social Security Number out there for the public to see. It now appears Mr. Davis and his company are being sued in three states because his “lifelock” doesn’t work! To take it a step further, it has been found that Mr. Davis’ identity has been compromised so many times he has over 20 drivers licenses in various states.

I know what you are saying; Why is a background screening company writing about a story like this? Its simple, all the privacy legislation and identity theft news was kicked off a few years ago because of a data breach in our industry. There are now several areas of the FACT Act that require us to help consumers when they are victims of these crimes. Identity theft is a serious matter, consumers are out billions do dollars every year and services like this are not making consumers lives any easier!

The best thing you can do to ensure you are not a victim is check your credit report at least once if not twice yearly. The FTC has some great resources to further protect yourself. If you feel you are a victim, contact your attorney immediately.

ID-protection ads come back to bite pitchman

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