Complying with the Fair Credit Reporting Act is supposed to be relatively straightforward for employers, but it continues to be one of the biggest stumbling blocks. The latest company to get accused of violating FCRA law is Kohl’s Department Stores Inc., but this time, a judge appears to be siding with the store.

Plaintiff’s accused Kohl’s of bundling credit report disclosure forms with other paperwork. This Law360 article says, “Plaintiffs’ attorneys quoted from the FCRA, which says that job applicants must be notified in writing in a “separate, clear and conspicuous document” that the employer may obtain a credit report. Because the Kohl’s notification was combined with other materials, it wasn’t separate, clear and conspicuous, attorney Shaun Setareh of Setareh Law Group said.”

Kohl’s argued that the disclosure form was a separate piece of paper with no extra stuff on it, but that it was presented at the same time as another form.

At the last hearing, the judge reportedly said: “Where’s the case that says that? They can read the package. … I gotta say, this makes no sense whatsoever.”

FCRA Nuts and Bolts

This federal consumer protection statute has been around a for a long time (1970) and, coupled with the Consumer Credit Protection Act, was designed to set guidelines for employers to protect employees, especially when it come to background screening.

According to the Federal Trade Commission (FTC), “The Fair Credit Reporting Act (FCRA) helps ensure the accuracy, fairness, and privacy of the information provided by consumer reporting agencies. The FCRA also holds consumer reporting agencies and the creditors that provide the information in your credit report responsible for correcting inaccurate or incomplete information in your report.”

The FCRA protects you and your financial interests if any of your personal information relating to your credit data and/or credit report is inaccurate, compromised and somehow used against you, like not getting a job.

Kohl’s is one of dozens of big name companies who have found themselves answering for alleged FCRA violations in court within the last few years. This ActiveCare post outlines the top three reasons why big name companies keep screwing up.

So how can you protect your company?

Written Disclosure and Authorization Required

The FCRA requires any employer intending to run a consumer report to first disclose to applicants or employees that a consumer report may be obtained for employment purposes. This disclosure cannot be included in an employment application or other document that contains any extraneous information. The employer must also obtain an employee’s or applicant’s written consent before running the report.

Reporting Requirements

Employers also must comply with specific reporting requirements. Before obtaining a consumer report from a consumer reporting agency, the employer must provide certification to the reporting agency that they are  requesting the report for employment purposes;have provided the required disclosure to the applicant; have obtained the necessary written consent to obtain the report; will provide the applicant with a copy of the report along with notifying them of their rights before taking any adverse action based in whole or in part on the results; an will not use the results from the report in a manner that violates federal or state equal opportunity laws.

Pre-adverse Action and Adverse Action Notices

If employer plans to take any adverse action based in whole or in part upon results obtained from a consumer report, the FCRA requires the employer to provide specific notifications to the applicant or employee.

An “adverse action” is either a denial of employment or any other decision that adversely affects any current or prospective employee. The FCRA requires employers to provide a copy of the consumer report results to the applicant or employee and additionally provide them with a copy of their rights under the FCRA (the “Summary of Rights Under the FCRA”) before taking adverse action based upon information contained in the consumer report.

When the employer takes adverse action, they must then provide the applicant or employee with the following information:

  • Name, address, and telephone number of the consumer reporting agency issuing the report
  • Statement that the consumer reporting agency was not the decision maker and can not explain why the adverse decision was made
  • Statement regarding the applicant or employee’s right to obtain a free disclosure of the report from the agency if the applicant or employee requests the report within 60 days of notice of the adverse action
  • Statement regarding the applicant or employee’s right to dispute directly with the consumer reporting agency the accuracy or completeness of any information provided by the agency.

A reliable background screening company like Active Screening will provide you with compliance expertise necessary to meet all demands. They will also keep you informed on the constantly evolving regulations changes.

But Active Screening goes one step further for our clients. We’ve actually developed software platforms that will have all the forms and notices written and ready for you to use, without the worry of designing them yourself. Platforms such as ACTivate can integrate with your existing Applicant Tracking System to make the screening process that much easier.

FCRA Questions?

If big name companies like Kohl’s can still fall victim to FCRA violations, then small businesses are especially vulnerable because they probably don’t have the deep pockets the big players do. If you have any questions about complying with FCRA, our team of experts is happy to provide you answers. Give us a call today at 1-800-319-5580 or leave us a comment below.

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