The Consumer Credit Reporting Reform Act of 1996
The Consumer Credit Reporting Reform Act of 1996 amended the Fair Credit Reporting Act. It affects credit reports obtained for employment purposes and became effective on September 28, 1997. Some employers obtain credit reports to determine if the applicant can be bonded, which may be a requirement if the job position involves handling money. Under this law, employers who conduct credit checks on employees must:
- Disclose to the applicant in advance, the company's intention
to obtain a credit report for employment purposes; and
- Obtain written authorization from the applicant to conduct the credit check.
The sample Pre-Employment Credit Check form can be used for both disclosure to and written authorization from the applicant. This form should be given to the applicant along with the application form.
Prior to taking action based on the report, the employer must provide to the applicant:
- A copy of the report; and
- A description in writing of the rights of the applicant under this title, as prescribed by the Federal Trade Commission (to be provided by the Consumer Reporting Agency).
The section of the Consumer Credit Reporting Reform Act of 1996 that deals with Employment appears below.
Section 604
§ 1681b. Permissible Purposes of Reports
b. Conditions for Furnishing and Using Consumer Reports for Employment Purposes:
- Certification from user - A consumer reporting agency may furnish a consumer report for employment purposes only if:
- The person who obtains such report from the agency certifies to the agency that:
i. The person has complied with paragraph (2) with respect to the consumer report, and the person will comply with paragraph (3) with respect to the consumer report if paragraph (3) becomes applicable; and
ii. Information from the consumer report will not be used in violation of any applicable federal or state equal employment opportunity law or regulation; and
- The consumer reporting agency provides with the report a summary of the consumer's rights under this title, as prescribed by the Federal Trade Commission under Section 609(c)(3).
- Disclosure to consumer - A person may not procure a consumer report, or cause a consumer report to be procured, for employment purposes with respect to any consumer, unless:
- A clear and conspicuous disclosure has been made in writing to the consumer at any time before the report is procured or caused to be procured, in a document that consists solely of the disclosure, that a consumer report may be obtained for employment purposes; and
- The consumer has authorized in writing the procurement of the report by that person.
- Conditions on use for adverse actions - In using a consumer report for employment purposes, before taking any adverse action based in whole or in part on the report, the person intending to take such adverse action shall provide to the consumer to whom the report relates:
- A copy of the report; and
- A description in writing of the rights of the consumer under this title, as prescribed by the Federal Trade Commission under Section 609(c)(3).
The Consumer Reporting Employment Clarification Act of 1998
The Consumer Reporting Employment Clarification Act of 1998, enacted on November 2, 1998, further amended the Fair Credit Reporting Act. The amendments included the elimination of the requirement that reference checking companies withhold information from clients about the criminal convictions of job candidates or employees, if the convictions are more than seven years old. Also, employers can now obtain consent from commercial truck drivers by telephone to have their driving records and backgrounds checked.
Note that some state laws still reflect the earlier version or Fair Credit Reporting Act. If state laws are more consumer friendly than The Consumer Reporting Employment Clarification Act of 1998, then the state laws will prevail. Thus in some states, The Consumer Reporting Employment Clarification Act amendments do not apply.
